Correlation Between Future Generation and Bravura Solutions

Can any of the company-specific risk be diversified away by investing in both Future Generation and Bravura Solutions 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 Future Generation and Bravura Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Future Generation Global and Bravura Solutions, you can compare the effects of market volatilities on Future Generation and Bravura Solutions 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 Future Generation with a short position of Bravura Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Generation and Bravura Solutions.

Diversification Opportunities for Future Generation and Bravura Solutions

0.61

Correlation Coefficient

Future Generation  Bravura Solutions

Poor diversification

The 3 months correlation between Future and Bravura is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Future Generation Global and Bravura Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bravura Solutions and Future Generation 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 Future Generation Global are associated (or correlated) with Bravura Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bravura Solutions has no effect on the direction of Future Generation i.e., Future Generation and Bravura Solutions go up and down completely randomly.

Pair Corralation between Future Generation and Bravura Solutions

Assuming the 90 days trading horizon Future Generation is expected to generate 5.0 times less return on investment than Bravura Solutions. But when comparing it to its historical volatility, Future Generation Global is 4.27 times less risky than Bravura Solutions. It trades about 0.06 of its potential returns per unit of risk. Bravura Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Bravura Solutions on October 4, 2024 and sell it today you would earn a total of  154.00  from holding Bravura Solutions or generate 216.9% return on investment over 90 days.

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

Future Generation Global  vs.  Bravura Solutions

Future Generation Global

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Future Generation Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Future Generation may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bravura Solutions

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bravura Solutions are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bravura Solutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Generation and Bravura Solutions

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

The idea behind Future Generation Global and Bravura Solutions 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.