Correlation Between Brompton Global and Forstrong Global

Can any of the company-specific risk be diversified away by investing in both Brompton Global and Forstrong Global 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 Brompton Global and Forstrong Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brompton Global Dividend and Forstrong Global Income, you can compare the effects of market volatilities on Brompton Global and Forstrong Global 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 Brompton Global with a short position of Forstrong Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Global and Forstrong Global.

Diversification Opportunities for Brompton Global and Forstrong Global

0.71

Correlation Coefficient

Brompton Global  Forstrong Global

Poor diversification

The 3 months correlation between Brompton and Forstrong is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Global Dividend and Forstrong Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forstrong Global Income and Brompton Global 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 Brompton Global Dividend are associated (or correlated) with Forstrong Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forstrong Global Income has no effect on the direction of Brompton Global i.e., Brompton Global and Forstrong Global go up and down completely randomly.

Pair Corralation between Brompton Global and Forstrong Global

Assuming the 90 days trading horizon Brompton Global Dividend is expected to generate 2.78 times more return on investment than Forstrong Global. However, Brompton Global is 2.78 times more volatile than Forstrong Global Income. It trades about 0.15 of its potential returns per unit of risk. Forstrong Global Income is currently generating about 0.1 per unit of risk. If you would invest  2,125  in Brompton Global Dividend on September 2, 2024 and sell it today you would earn a total of  152.00  from holding Brompton Global Dividend or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Brompton Global Dividend  vs.  Forstrong Global Income

Brompton Global Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Global Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Forstrong Global Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forstrong Global Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton Global and Forstrong Global

The main advantage of trading using opposite Brompton Global and Forstrong Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton Global position performs unexpectedly, Forstrong Global 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 Forstrong Global will offset losses from the drop in Forstrong Global's long position.

The idea behind Brompton Global Dividend and Forstrong Global Income 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..