Correlation Between Brady and Blue Line

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

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

Diversification Opportunities for Brady and Blue Line

-0.1

Correlation Coefficient

Brady  Blue Line

Good diversification

The 3 months correlation between Brady and Blue is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brady and Blue Line Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Line Protection and Brady 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 Brady are associated (or correlated) with Blue Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Line Protection has no effect on the direction of Brady i.e., Brady and Blue Line go up and down completely randomly.

Pair Corralation between Brady and Blue Line

Considering the 90-day investment horizon Brady is expected to generate 14.3 times less return on investment than Blue Line. But when comparing it to its historical volatility, Brady is 17.01 times less risky than Blue Line. It trades about 0.1 of its potential returns per unit of risk. Blue Line Protection is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Blue Line Protection on September 24, 2024 and sell it today you would earn a total of  1.51  from holding Blue Line Protection or generate 37.75% return on investment over 90 days.

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

Brady  vs.  Blue Line Protection

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.

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brady and Blue Line

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

The idea behind Brady and Blue Line Protection 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.