Correlation Between Brompton European and Commander Resources

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

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

Diversification Opportunities for Brompton European and Commander Resources

-0.41

Correlation Coefficient

Brompton European  Commander Resources

Very good diversification

The 3 months correlation between Brompton and Commander is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and Brompton European 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 Brompton European Dividend are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Brompton European i.e., Brompton European and Commander Resources go up and down completely randomly.

Pair Corralation between Brompton European and Commander Resources

Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 0.28 times more return on investment than Commander Resources. However, Brompton European Dividend is 3.56 times less risky than Commander Resources. It trades about 0.21 of its potential returns per unit of risk. Commander Resources is currently generating about -0.24 per unit of risk. If you would invest  1,041  in Brompton European Dividend on October 23, 2024 and sell it today you would earn a total of  29.00  from holding Brompton European Dividend or generate 2.79% return on investment over 90 days.

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

Brompton European Dividend  vs.  Commander Resources

Brompton European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton European Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Commander Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Commander Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Commander Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Brompton European and Commander Resources

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

The idea behind Brompton European Dividend and Commander Resources 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.