Correlation Between CompX International and Brady

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

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

Diversification Opportunities for CompX International and Brady

0.21

Correlation Coefficient

CompX International  Brady

Modest diversification

The 3 months correlation between CompX and Brady is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CompX International and Brady in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brady and CompX International 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 CompX International are associated (or correlated) with Brady. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brady has no effect on the direction of CompX International i.e., CompX International and Brady go up and down completely randomly.

Pair Corralation between CompX International and Brady

Considering the 90-day investment horizon CompX International is expected to under-perform the Brady. In addition to that, CompX International is 2.72 times more volatile than Brady. It trades about -0.02 of its total potential returns per unit of risk. Brady is currently generating about 0.0 per unit of volatility. If you would invest  7,464  in Brady on November 28, 2024 and sell it today you would lose (79.00) from holding Brady or give up 1.06% of portfolio value over 90 days.

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

CompX International  vs.  Brady

CompX International

Risk-Adjusted Performance

Very Weak

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

Brady

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brady has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Brady is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CompX International and Brady

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

The idea behind CompX International and Brady 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..