Correlation Between Brickworks and Bravura Solutions

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

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

Diversification Opportunities for Brickworks and Bravura Solutions

-0.61

Correlation Coefficient

Brickworks  Bravura Solutions

Excellent diversification

The 3 months correlation between Brickworks and Bravura is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Brickworks and Bravura Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravura Solutions and Brickworks 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 Brickworks are associated (or correlated) with Bravura Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravura Solutions has no effect on the direction of Brickworks i.e., Brickworks and Bravura Solutions go up and down completely randomly.

Pair Corralation between Brickworks and Bravura Solutions

Assuming the 90 days trading horizon Brickworks is expected to under-perform the Bravura Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Brickworks is 7.26 times less risky than Bravura Solutions. The stock trades about -0.03 of its potential returns per unit of risk. The Bravura Solutions is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Bravura Solutions on October 1, 2024 and sell it today you would earn a total of  60.00  from holding Bravura Solutions or generate 38.22% return on investment over 90 days.

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

Brickworks  vs.  Bravura Solutions

Brickworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bravura Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brickworks and Bravura Solutions

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

The idea behind Brickworks and Bravura Solutions 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.