Correlation Between Credit Clear and Bravura Solutions

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

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

Diversification Opportunities for Credit Clear and Bravura Solutions

0.03

Correlation Coefficient

Credit Clear  Bravura Solutions

Significant diversification

The 3 months correlation between Credit and Bravura is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Credit Clear and Bravura Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravura Solutions and Credit Clear 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 Credit Clear are associated (or correlated) with Bravura Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravura Solutions has no effect on the direction of Credit Clear i.e., Credit Clear and Bravura Solutions go up and down completely randomly.

Pair Corralation between Credit Clear and Bravura Solutions

Assuming the 90 days trading horizon Credit Clear is expected to under-perform the Bravura Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Credit Clear is 1.55 times less risky than Bravura Solutions. The stock trades about -0.03 of its potential returns per unit of risk. The Bravura Solutions is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Bravura Solutions on October 3, 2024 and sell it today you would earn a total of  68.00  from holding Bravura Solutions or generate 43.31% return on investment over 90 days.

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

Credit Clear  vs.  Bravura Solutions

Credit Clear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Clear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Credit Clear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bravura Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Credit Clear and Bravura Solutions

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

The idea behind Credit Clear and Bravura Solutions 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.