Correlation Between Blue Line and Brady

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

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

Diversification Opportunities for Blue Line and Brady

-0.16

Correlation Coefficient

Blue Line  Brady

Good diversification

The 3 months correlation between Blue and Brady is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Blue Line Protection and Brady in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brady and Blue Line 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 Blue Line Protection are associated (or correlated) with Brady. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brady has no effect on the direction of Blue Line i.e., Blue Line and Brady go up and down completely randomly.

Pair Corralation between Blue Line and Brady

Given the investment horizon of 90 days Blue Line Protection is expected to generate 14.79 times more return on investment than Brady. However, Blue Line is 14.79 times more volatile than Brady. It trades about 0.07 of its potential returns per unit of risk. Brady is currently generating about 0.06 per unit of risk. If you would invest  15.00  in Blue Line Protection on October 12, 2024 and sell it today you would lose (8.99) from holding Blue Line Protection or give up 59.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Blue Line Protection  vs.  Brady

Blue Line Protection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Line Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brady

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brady has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Brady is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Blue Line and Brady

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

The idea behind Blue Line Protection and Brady 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.