Correlation Between Brompton European and Rubicon Organics

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

Diversification Opportunities for Brompton European and Rubicon Organics

-0.22

Correlation Coefficient

Brompton European  Rubicon Organics

Very good diversification

The 3 months correlation between Brompton and Rubicon is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Rubicon Organics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rubicon Organics 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 Rubicon Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rubicon Organics has no effect on the direction of Brompton European i.e., Brompton European and Rubicon Organics go up and down completely randomly.

Pair Corralation between Brompton European and Rubicon Organics

Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 0.28 times more return on investment than Rubicon Organics. However, Brompton European Dividend is 3.59 times less risky than Rubicon Organics. It trades about 0.01 of its potential returns per unit of risk. Rubicon Organics is currently generating about -0.1 per unit of risk. If you would invest  1,060  in Brompton European Dividend on August 31, 2024 and sell it today you would lose (1.00) from holding Brompton European Dividend or give up 0.09% of portfolio value over 90 days.

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

Brompton European Dividend  vs.  Rubicon Organics

Brompton European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton European Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Rubicon Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rubicon Organics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Brompton European and Rubicon Organics

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

The idea behind Brompton European Dividend and Rubicon Organics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.