Correlation Between Garofalo Health and Brown Forman

Can any of the company-specific risk be diversified away by investing in both Garofalo Health and Brown Forman 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 Garofalo Health and Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Garofalo Health Care and Brown Forman Corp, you can compare the effects of market volatilities on Garofalo Health and Brown Forman 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 Garofalo Health with a short position of Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garofalo Health and Brown Forman.

Diversification Opportunities for Garofalo Health and Brown Forman

0.04

Correlation Coefficient

Garofalo Health  Brown Forman

Significant diversification

The 3 months correlation between Garofalo and Brown is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Garofalo Health Care and Brown Forman Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman Corp and Garofalo Health 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 Garofalo Health Care are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman Corp has no effect on the direction of Garofalo Health i.e., Garofalo Health and Brown Forman go up and down completely randomly.

Pair Corralation between Garofalo Health and Brown Forman

Assuming the 90 days horizon Garofalo Health Care is expected to generate 0.89 times more return on investment than Brown Forman. However, Garofalo Health Care is 1.12 times less risky than Brown Forman. It trades about -0.17 of its potential returns per unit of risk. Brown Forman Corp is currently generating about -0.59 per unit of risk. If you would invest  548.00  in Garofalo Health Care on October 9, 2024 and sell it today you would lose (22.00) from holding Garofalo Health Care or give up 4.01% of portfolio value over 90 days.

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

Garofalo Health Care  vs.  Brown Forman Corp

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Garofalo Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brown Forman Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brown Forman Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Garofalo Health and Brown Forman

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

The idea behind Garofalo Health Care and Brown Forman Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.