Correlation Between Broadridge Financial and McGrath RentCorp
Can any of the company-specific risk be diversified away by investing in both Broadridge Financial and McGrath RentCorp 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 Broadridge Financial and McGrath RentCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadridge Financial Solutions and McGrath RentCorp, you can compare the effects of market volatilities on Broadridge Financial and McGrath RentCorp 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 Broadridge Financial with a short position of McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadridge Financial and McGrath RentCorp.
Diversification Opportunities for Broadridge Financial and McGrath RentCorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Broadridge and McGrath is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and Broadridge Financial 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 Broadridge Financial Solutions are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Broadridge Financial i.e., Broadridge Financial and McGrath RentCorp go up and down completely randomly.
Pair Corralation between Broadridge Financial and McGrath RentCorp
Allowing for the 90-day total investment horizon Broadridge Financial Solutions is expected to generate 0.74 times more return on investment than McGrath RentCorp. However, Broadridge Financial Solutions is 1.36 times less risky than McGrath RentCorp. It trades about 0.11 of its potential returns per unit of risk. McGrath RentCorp is currently generating about 0.04 per unit of risk. If you would invest 13,357 in Broadridge Financial Solutions on December 5, 2024 and sell it today you would earn a total of 11,126 from holding Broadridge Financial Solutions or generate 83.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Broadridge Financial Solutions vs. McGrath RentCorp
Performance |
Timeline |
Broadridge Financial |
McGrath RentCorp |
Broadridge Financial and McGrath RentCorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Broadridge Financial and McGrath RentCorp
The main advantage of trading using opposite Broadridge Financial and McGrath RentCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadridge Financial position performs unexpectedly, McGrath RentCorp 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 McGrath RentCorp will offset losses from the drop in McGrath RentCorp's long position.Broadridge Financial vs. CACI International | Broadridge Financial vs. CDW Corp | Broadridge Financial vs. Jack Henry Associates | Broadridge Financial vs. ExlService Holdings |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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