Correlation Between Brother Industries and ICC Holdings

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

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

Diversification Opportunities for Brother Industries and ICC Holdings

0.59

Correlation Coefficient

Brother Industries  ICC Holdings

Very weak diversification

The 3 months correlation between Brother and ICC is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Brother Industries and ICC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICC Holdings and Brother Industries 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 Brother Industries are associated (or correlated) with ICC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICC Holdings has no effect on the direction of Brother Industries i.e., Brother Industries and ICC Holdings go up and down completely randomly.

Pair Corralation between Brother Industries and ICC Holdings

Assuming the 90 days horizon Brother Industries is expected to under-perform the ICC Holdings. In addition to that, Brother Industries is 40.14 times more volatile than ICC Holdings. It trades about -0.14 of its total potential returns per unit of risk. ICC Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,290  in ICC Holdings on September 17, 2024 and sell it today you would earn a total of  33.00  from holding ICC Holdings or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.23%
Values	Daily Returns

Brother Industries  vs.  ICC Holdings

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries 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 technical 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.

ICC Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICC Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, ICC Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brother Industries and ICC Holdings

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

The idea behind Brother Industries and ICC Holdings 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.