Correlation Between Brandes Core and Brandes International

Can any of the company-specific risk be diversified away by investing in both Brandes Core and Brandes International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Brandes Core and Brandes International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brandes E Plus and Brandes International Small, you can compare the effects of market volatilities on Brandes Core and Brandes International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Brandes Core with a short position of Brandes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes Core and Brandes International.

Diversification Opportunities for Brandes Core and Brandes International

0.33

Correlation Coefficient

Brandes Core  Brandes International

Weak diversification

The 3 months correlation between Brandes and Brandes is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brandes E Plus and Brandes International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes International and Brandes Core is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Brandes E Plus are associated (or correlated) with Brandes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes International has no effect on the direction of Brandes Core i.e., Brandes Core and Brandes International go up and down completely randomly.

Pair Corralation between Brandes Core and Brandes International

Assuming the 90 days horizon Brandes E Plus is expected to under-perform the Brandes International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Brandes E Plus is 2.21 times less risky than Brandes International. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Brandes International Small is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,887  in Brandes International Small on September 5, 2024 and sell it today you would earn a total of  9.00  from holding Brandes International Small or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brandes E Plus  vs.  Brandes International Small

Brandes E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brandes E Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Brandes Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brandes International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes International Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Brandes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brandes Core and Brandes International

The main advantage of trading using opposite Brandes Core and Brandes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes Core position performs unexpectedly, Brandes International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brandes International will offset losses from the drop in Brandes International's long position.

The idea behind Brandes E Plus and Brandes International Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.