Correlation Between Brimstone Investment and Pan African

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

By analyzing existing cross correlation between Brimstone Investment and Pan African Resources, you can compare the effects of market volatilities on Brimstone Investment and Pan African 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 Brimstone Investment with a short position of Pan African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brimstone Investment and Pan African.

Diversification Opportunities for Brimstone Investment and Pan African

-0.14

Correlation Coefficient

Brimstone Investment  Pan African

Good diversification

The 3 months correlation between Brimstone and Pan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Brimstone Investment and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources and Brimstone Investment 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 Brimstone Investment are associated (or correlated) with Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of Brimstone Investment i.e., Brimstone Investment and Pan African go up and down completely randomly.

Pair Corralation between Brimstone Investment and Pan African

Assuming the 90 days trading horizon Brimstone Investment is expected to under-perform the Pan African. In addition to that, Brimstone Investment is 1.97 times more volatile than Pan African Resources. It trades about -0.02 of its total potential returns per unit of risk. Pan African Resources is currently generating about 0.09 per unit of volatility. If you would invest  77,000  in Pan African Resources on September 14, 2024 and sell it today you would earn a total of  9,100  from holding Pan African Resources or generate 11.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Brimstone Investment  vs.  Pan African Resources

Brimstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Brimstone Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pan African Resources

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Pan African Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brimstone Investment and Pan African

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

The idea behind Brimstone Investment and Pan African Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.