Correlation Between CAVA Group, and Brother Industries

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

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

Diversification Opportunities for CAVA Group, and Brother Industries

-0.28

Correlation Coefficient

CAVA Group,  Brother Industries

Very good diversification

The 3 months correlation between CAVA and Brother is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CAVA Group, and Brother Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries and CAVA Group, 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 CAVA Group, are associated (or correlated) with Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of CAVA Group, i.e., CAVA Group, and Brother Industries go up and down completely randomly.

Pair Corralation between CAVA Group, and Brother Industries

Given the investment horizon of 90 days CAVA Group, is expected to under-perform the Brother Industries. In addition to that, CAVA Group, is 1.41 times more volatile than Brother Industries Ltd. It trades about -0.12 of its total potential returns per unit of risk. Brother Industries Ltd is currently generating about -0.05 per unit of volatility. If you would invest  3,515  in Brother Industries Ltd on September 18, 2024 and sell it today you would lose (98.00) from holding Brother Industries Ltd or give up 2.79% of portfolio value over 90 days.

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

CAVA Group,  vs.  Brother Industries Ltd

CAVA Group,

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAVA Group, are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CAVA Group, is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CAVA Group, and Brother Industries

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

The idea behind CAVA Group, and Brother Industries Ltd 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.