Correlation Between Brembo SpA and Continental Aktiengesellscha

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

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

Diversification Opportunities for Brembo SpA and Continental Aktiengesellscha

-0.53

Correlation Coefficient

Brembo SpA  Continental Aktiengesellscha

Excellent diversification

The 3 months correlation between Brembo and Continental is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brembo SpA and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha and Brembo SpA 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 Brembo SpA are associated (or correlated) with Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of Brembo SpA i.e., Brembo SpA and Continental Aktiengesellscha go up and down completely randomly.

Pair Corralation between Brembo SpA and Continental Aktiengesellscha

Assuming the 90 days horizon Brembo SpA is expected to under-perform the Continental Aktiengesellscha. But the otc stock apears to be less risky and, when comparing its historical volatility, Brembo SpA is 1.55 times less risky than Continental Aktiengesellscha. The otc stock trades about -0.09 of its potential returns per unit of risk. The Continental Aktiengesellschaft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,760  in Continental Aktiengesellschaft on September 15, 2024 and sell it today you would earn a total of  1,364  from holding Continental Aktiengesellschaft or generate 23.68% return on investment over 90 days.

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

Brembo SpA  vs.  Continental Aktiengesellschaft

Brembo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Continental Aktiengesellscha

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Continental Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brembo SpA and Continental Aktiengesellscha

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

The idea behind Brembo SpA and Continental Aktiengesellschaft 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.