Correlation Between Brompton European and AGFiQ Market

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

Diversification Opportunities for Brompton European and AGFiQ Market

0.58

Correlation Coefficient

Brompton European  AGFiQ Market

Very weak diversification

The 3 months correlation between Brompton and AGFiQ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and AGFiQ Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGFiQ Market Neutral 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 AGFiQ Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGFiQ Market Neutral has no effect on the direction of Brompton European i.e., Brompton European and AGFiQ Market go up and down completely randomly.

Pair Corralation between Brompton European and AGFiQ Market

Assuming the 90 days trading horizon Brompton European is expected to generate 1.3 times less return on investment than AGFiQ Market. But when comparing it to its historical volatility, Brompton European Dividend is 1.59 times less risky than AGFiQ Market. It trades about 0.11 of its potential returns per unit of risk. AGFiQ Market Neutral is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,938  in AGFiQ Market Neutral on December 28, 2024 and sell it today you would earn a total of  177.00  from holding AGFiQ Market Neutral or generate 9.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Brompton European Dividend  vs.  AGFiQ Market Neutral

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 8 (%) 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.

AGFiQ Market Neutral

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGFiQ Market Neutral are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AGFiQ Market may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Brompton European and AGFiQ Market

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

The idea behind Brompton European Dividend and AGFiQ Market Neutral 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.