Correlation Between Brother Industries and HNI

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

By analyzing existing cross correlation between Brother Industries and HNI Corporation, you can compare the effects of market volatilities on Brother Industries and HNI 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 Brother Industries with a short position of HNI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brother Industries and HNI.

Diversification Opportunities for Brother Industries and HNI

-0.52

Correlation Coefficient

Brother Industries  HNI

Excellent diversification

The 3 months correlation between Brother and HNI is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Brother Industries and HNI Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corporation and Brother Industries 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 Brother Industries are associated (or correlated) with HNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corporation has no effect on the direction of Brother Industries i.e., Brother Industries and HNI go up and down completely randomly.

Pair Corralation between Brother Industries and HNI

Assuming the 90 days horizon Brother Industries is expected to generate 1.08 times more return on investment than HNI. However, Brother Industries is 1.08 times more volatile than HNI Corporation. It trades about 0.06 of its potential returns per unit of risk. HNI Corporation is currently generating about -0.06 per unit of risk. If you would invest  1,650  in Brother Industries on September 14, 2024 and sell it today you would earn a total of  30.00  from holding Brother Industries or generate 1.82% return on investment over 90 days.

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

Brother Industries  vs.  HNI Corp.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brother Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HNI Corporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HNI Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HNI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brother Industries and HNI

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

The idea behind Brother Industries and HNI Corporation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.