Correlation Between E M and BROWNS INVESTMENTS

Can any of the company-specific risk be diversified away by investing in both E M and BROWNS INVESTMENTS 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 E M and BROWNS INVESTMENTS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E M L and BROWNS INVESTMENTS PLC, you can compare the effects of market volatilities on E M and BROWNS INVESTMENTS 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 E M with a short position of BROWNS INVESTMENTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of E M and BROWNS INVESTMENTS.

Diversification Opportunities for E M and BROWNS INVESTMENTS

0.07

Correlation Coefficient

E M  BROWNS INVESTMENTS

Significant diversification

The 3 months correlation between EMLN0000 and BROWNS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding E M L and BROWNS INVESTMENTS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROWNS INVESTMENTS PLC and E M 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 E M L are associated (or correlated) with BROWNS INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROWNS INVESTMENTS PLC has no effect on the direction of E M i.e., E M and BROWNS INVESTMENTS go up and down completely randomly.

Pair Corralation between E M and BROWNS INVESTMENTS

Assuming the 90 days trading horizon E M is expected to generate 1.21 times less return on investment than BROWNS INVESTMENTS. In addition to that, E M is 1.37 times more volatile than BROWNS INVESTMENTS PLC. It trades about 0.01 of its total potential returns per unit of risk. BROWNS INVESTMENTS PLC is currently generating about 0.01 per unit of volatility. If you would invest  680.00  in BROWNS INVESTMENTS PLC on September 26, 2024 and sell it today you would earn a total of  10.00  from holding BROWNS INVESTMENTS PLC or generate 1.47% return on investment over 90 days.

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

E M L  vs.  BROWNS INVESTMENTS PLC

E M L

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in E M L are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

BROWNS INVESTMENTS PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BROWNS INVESTMENTS PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BROWNS INVESTMENTS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E M and BROWNS INVESTMENTS

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

The idea behind E M L and BROWNS INVESTMENTS PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.