Correlation Between Brambles and Horseshoe Metals

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

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

Diversification Opportunities for Brambles and Horseshoe Metals

0.39

Correlation Coefficient

Brambles  Horseshoe Metals

Weak diversification

The 3 months correlation between Brambles and Horseshoe is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Brambles and Horseshoe Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horseshoe Metals and Brambles 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 Brambles are associated (or correlated) with Horseshoe Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horseshoe Metals has no effect on the direction of Brambles i.e., Brambles and Horseshoe Metals go up and down completely randomly.

Pair Corralation between Brambles and Horseshoe Metals

Assuming the 90 days trading horizon Brambles is expected to generate 29.74 times less return on investment than Horseshoe Metals. But when comparing it to its historical volatility, Brambles is 13.6 times less risky than Horseshoe Metals. It trades about 0.08 of its potential returns per unit of risk. Horseshoe Metals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Horseshoe Metals on October 3, 2024 and sell it today you would earn a total of  0.30  from holding Horseshoe Metals or generate 27.27% return on investment over 90 days.

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

Brambles  vs.  Horseshoe Metals

Brambles

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brambles are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Brambles is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Horseshoe Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horseshoe Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Horseshoe Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brambles and Horseshoe Metals

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

The idea behind Brambles and Horseshoe Metals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.