Correlation Between Brompton European and Financial

Can any of the company-specific risk be diversified away by investing in both Brompton European and Financial 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 Financial 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 Financial 15 Split, you can compare the effects of market volatilities on Brompton European and Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and Financial.

Diversification Opportunities for Brompton European and Financial

0.43

Correlation Coefficient

Brompton European  Financial

Very weak diversification

The 3 months correlation between Brompton and Financial is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Financial 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial 15 Split 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial 15 Split has no effect on the direction of Brompton European i.e., Brompton European and Financial go up and down completely randomly.

Pair Corralation between Brompton European and Financial

Assuming the 90 days trading horizon Brompton European is expected to generate 1.33 times less return on investment than Financial. In addition to that, Brompton European is 3.58 times more volatile than Financial 15 Split. It trades about 0.09 of its total potential returns per unit of risk. Financial 15 Split is currently generating about 0.42 per unit of volatility. If you would invest  1,045  in Financial 15 Split on November 29, 2024 and sell it today you would earn a total of  77.00  from holding Financial 15 Split or generate 7.37% 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.  Financial 15 Split

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 6 (%) of all global equities and portfolios over the last 90 days. 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.

Financial 15 Split

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Brompton European and Financial

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

The idea behind Brompton European Dividend and Financial 15 Split 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.