Correlation Between Brompton European and Generation Mining

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

Diversification Opportunities for Brompton European and Generation Mining

0.16

Correlation Coefficient

Brompton European  Generation Mining

Average diversification

The 3 months correlation between Brompton and Generation is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Generation Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Mining 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 Generation Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Mining has no effect on the direction of Brompton European i.e., Brompton European and Generation Mining go up and down completely randomly.

Pair Corralation between Brompton European and Generation Mining

Assuming the 90 days trading horizon Brompton European is expected to generate 5.63 times less return on investment than Generation Mining. But when comparing it to its historical volatility, Brompton European Dividend is 7.09 times less risky than Generation Mining. It trades about 0.13 of its potential returns per unit of risk. Generation Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Generation Mining on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Generation Mining or generate 35.71% return on investment over 90 days.

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

Brompton European Dividend  vs.  Generation Mining

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 10 (%) 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 April 2025.

Generation Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Generation Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brompton European and Generation Mining

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

The idea behind Brompton European Dividend and Generation Mining 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.