Correlation Between Brompton European and Harvest Clean

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

Diversification Opportunities for Brompton European and Harvest Clean

-0.64

Correlation Coefficient

Brompton European  Harvest Clean

Excellent diversification

The 3 months correlation between Brompton and Harvest is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Harvest Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Clean Energy 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 Harvest Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Clean Energy has no effect on the direction of Brompton European i.e., Brompton European and Harvest Clean go up and down completely randomly.

Pair Corralation between Brompton European and Harvest Clean

Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 0.63 times more return on investment than Harvest Clean. However, Brompton European Dividend is 1.58 times less risky than Harvest Clean. It trades about 0.32 of its potential returns per unit of risk. Harvest Clean Energy is currently generating about -0.01 per unit of risk. If you would invest  1,065  in Brompton European Dividend on December 5, 2024 and sell it today you would earn a total of  60.00  from holding Brompton European Dividend or generate 5.63% return on investment over 90 days.

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

Brompton European Dividend  vs.  Harvest Clean Energy

Brompton European

Risk-Adjusted Performance

Modest

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.

Harvest Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Brompton European and Harvest Clean

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

The idea behind Brompton European Dividend and Harvest Clean Energy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.