Correlation Between HNI and Brother Industries

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

By analyzing existing cross correlation between HNI Corporation and Brother Industries, you can compare the effects of market volatilities on HNI and Brother Industries 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 HNI with a short position of Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI and Brother Industries.

Diversification Opportunities for HNI and Brother Industries

-0.52

Correlation Coefficient

HNI  Brother Industries

Excellent diversification

The 3 months correlation between HNI and Brother is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp. and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries and HNI 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 HNI Corporation are associated (or correlated) with Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of HNI i.e., HNI and Brother Industries go up and down completely randomly.

Pair Corralation between HNI and Brother Industries

Assuming the 90 days horizon HNI Corporation is expected to generate 0.95 times more return on investment than Brother Industries. However, HNI Corporation is 1.05 times less risky than Brother Industries. It trades about 0.09 of its potential returns per unit of risk. Brother Industries is currently generating about -0.01 per unit of risk. If you would invest  4,630  in HNI Corporation on September 15, 2024 and sell it today you would earn a total of  420.00  from holding HNI Corporation or generate 9.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

HNI Corp.  vs.  Brother Industries

HNI Corporation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HNI Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HNI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with HNI and Brother Industries

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

The idea behind HNI Corporation and Brother Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.