Correlation Between Brickworks and MotorCycle Holdings

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

By analyzing existing cross correlation between Brickworks and MotorCycle Holdings, you can compare the effects of market volatilities on Brickworks and MotorCycle Holdings 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 MotorCycle Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brickworks and MotorCycle Holdings.

Diversification Opportunities for Brickworks and MotorCycle Holdings

-0.62

Correlation Coefficient

Brickworks  MotorCycle Holdings

Excellent diversification

The 3 months correlation between Brickworks and MotorCycle is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Brickworks and MotorCycle Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MotorCycle Holdings 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 MotorCycle Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MotorCycle Holdings has no effect on the direction of Brickworks i.e., Brickworks and MotorCycle Holdings go up and down completely randomly.

Pair Corralation between Brickworks and MotorCycle Holdings

Assuming the 90 days trading horizon Brickworks is expected to generate 0.61 times more return on investment than MotorCycle Holdings. However, Brickworks is 1.64 times less risky than MotorCycle Holdings. It trades about -0.08 of its potential returns per unit of risk. MotorCycle Holdings is currently generating about -0.39 per unit of risk. If you would invest  2,604  in Brickworks on October 27, 2024 and sell it today you would lose (44.00) from holding Brickworks or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Brickworks  vs.  MotorCycle Holdings

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 comparatively stable basic indicators, Brickworks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

MotorCycle Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MotorCycle Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MotorCycle Holdings is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brickworks and MotorCycle Holdings

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

The idea behind Brickworks and MotorCycle Holdings 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.