Correlation Between Brembo SpA and Optec International

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

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

Diversification Opportunities for Brembo SpA and Optec International

0.2

Correlation Coefficient

Brembo SpA  Optec International

Modest diversification

The 3 months correlation between Brembo and Optec is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Brembo SpA and Optec International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optec International 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 Optec International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optec International has no effect on the direction of Brembo SpA i.e., Brembo SpA and Optec International go up and down completely randomly.

Pair Corralation between Brembo SpA and Optec International

If you would invest  0.05  in Optec International on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Optec International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Brembo SpA  vs.  Optec International

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.

Optec International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optec International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Optec International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brembo SpA and Optec International

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

The idea behind Brembo SpA and Optec International 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.