Correlation Between Brambles and All American

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

By analyzing existing cross correlation between Brambles Ltd ADR and All American Pet, you can compare the effects of market volatilities on Brambles and All American 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 All American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brambles and All American.

Diversification Opportunities for Brambles and All American

0.11

Correlation Coefficient

Brambles  All American

Average diversification

The 3 months correlation between Brambles and All is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Brambles Ltd ADR and All American Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Pet 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 Ltd ADR are associated (or correlated) with All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Pet has no effect on the direction of Brambles i.e., Brambles and All American go up and down completely randomly.

Pair Corralation between Brambles and All American

Assuming the 90 days horizon Brambles Ltd ADR is expected to generate 0.04 times more return on investment than All American. However, Brambles Ltd ADR is 23.93 times less risky than All American. It trades about 0.03 of its potential returns per unit of risk. All American Pet is currently generating about -0.23 per unit of risk. If you would invest  2,459  in Brambles Ltd ADR on October 11, 2024 and sell it today you would earn a total of  12.00  from holding Brambles Ltd ADR or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Brambles Ltd ADR  vs.  All American Pet

Brambles ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brambles Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Brambles is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

All American Pet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in All American Pet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, All American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brambles and All American

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

The idea behind Brambles Ltd ADR and All American Pet 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..