Correlation Between Brunel International and Hydratec Industries

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

By analyzing existing cross correlation between Brunel International NV and Hydratec Industries NV, you can compare the effects of market volatilities on Brunel International and Hydratec Industries 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 Brunel International with a short position of Hydratec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunel International and Hydratec Industries.

Diversification Opportunities for Brunel International and Hydratec Industries

0.1

Correlation Coefficient

Brunel International  Hydratec Industries

Average diversification

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

Pair Corralation between Brunel International and Hydratec Industries

Assuming the 90 days trading horizon Brunel International NV is expected to generate 1.76 times more return on investment than Hydratec Industries. However, Brunel International is 1.76 times more volatile than Hydratec Industries NV. It trades about 0.12 of its potential returns per unit of risk. Hydratec Industries NV is currently generating about 0.0 per unit of risk. If you would invest  859.00  in Brunel International NV on September 16, 2024 and sell it today you would earn a total of  26.00  from holding Brunel International NV or generate 3.03% return on investment over 90 days.

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

Brunel International NV  vs.  Hydratec Industries NV

Brunel International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brunel International NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Brunel International is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Hydratec Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hydratec Industries NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Hydratec Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brunel International and Hydratec Industries

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

The idea behind Brunel International NV and Hydratec Industries NV 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.