Correlation Between Brompton European and Dynamic Active

Can any of the company-specific risk be diversified away by investing in both Brompton European and Dynamic Active 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 Dynamic Active 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 Dynamic Active Global, you can compare the effects of market volatilities on Brompton European and Dynamic Active 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 Dynamic Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and Dynamic Active.

Diversification Opportunities for Brompton European and Dynamic Active

0.54

Correlation Coefficient

Brompton European  Dynamic Active

Very weak diversification

The 3 months correlation between Brompton and Dynamic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Dynamic Active Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Global 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 Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Global has no effect on the direction of Brompton European i.e., Brompton European and Dynamic Active go up and down completely randomly.

Pair Corralation between Brompton European and Dynamic Active

Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 0.56 times more return on investment than Dynamic Active. However, Brompton European Dividend is 1.77 times less risky than Dynamic Active. It trades about 0.31 of its potential returns per unit of risk. Dynamic Active Global is currently generating about -0.02 per unit of risk. If you would invest  1,065  in Brompton European Dividend on November 20, 2024 and sell it today you would earn a total of  47.00  from holding Brompton European Dividend or generate 4.41% return on investment over 90 days.

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

Brompton European Dividend  vs.  Dynamic Active Global

Brompton European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton European may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Dynamic Active Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brompton European and Dynamic Active

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

The idea behind Brompton European Dividend and Dynamic Active Global 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.