Correlation Between Brompton North and Brompton Flaherty

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

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

Diversification Opportunities for Brompton North and Brompton Flaherty

0.44

Correlation Coefficient

Brompton North  Brompton Flaherty

Very weak diversification

The 3 months correlation between Brompton and Brompton is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Brompton North American and Brompton Flaherty Crumrine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Flaherty and Brompton North 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 North American are associated (or correlated) with Brompton Flaherty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Flaherty has no effect on the direction of Brompton North i.e., Brompton North and Brompton Flaherty go up and down completely randomly.

Pair Corralation between Brompton North and Brompton Flaherty

Assuming the 90 days trading horizon Brompton North American is expected to under-perform the Brompton Flaherty. In addition to that, Brompton North is 1.73 times more volatile than Brompton Flaherty Crumrine. It trades about -0.16 of its total potential returns per unit of risk. Brompton Flaherty Crumrine is currently generating about -0.1 per unit of volatility. If you would invest  2,304  in Brompton Flaherty Crumrine on October 12, 2024 and sell it today you would lose (22.00) from holding Brompton Flaherty Crumrine or give up 0.95% of portfolio value over 90 days.

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

Brompton North American  vs.  Brompton Flaherty Crumrine

Brompton North American

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton North American are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton North is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton Flaherty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton Flaherty Crumrine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton Flaherty 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 North and Brompton Flaherty

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

The idea behind Brompton North American and Brompton Flaherty Crumrine 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.