Correlation Between Horseshoe Metals and Brainchip Holdings

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

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

Diversification Opportunities for Horseshoe Metals and Brainchip Holdings

0.13

Correlation Coefficient

Horseshoe Metals  Brainchip Holdings

Average diversification

The 3 months correlation between Horseshoe and Brainchip is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Horseshoe Metals and Brainchip Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainchip Holdings and Horseshoe Metals 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 Horseshoe Metals are associated (or correlated) with Brainchip Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainchip Holdings has no effect on the direction of Horseshoe Metals i.e., Horseshoe Metals and Brainchip Holdings go up and down completely randomly.

Pair Corralation between Horseshoe Metals and Brainchip Holdings

Assuming the 90 days trading horizon Horseshoe Metals is expected to generate 1.67 times less return on investment than Brainchip Holdings. In addition to that, Horseshoe Metals is 1.26 times more volatile than Brainchip Holdings. It trades about 0.17 of its total potential returns per unit of risk. Brainchip Holdings is currently generating about 0.35 per unit of volatility. If you would invest  24.00  in Brainchip Holdings on October 3, 2024 and sell it today you would earn a total of  15.00  from holding Brainchip Holdings or generate 62.5% return on investment over 90 days.

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

Horseshoe Metals  vs.  Brainchip Holdings

Horseshoe Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horseshoe Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Horseshoe Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Brainchip Holdings

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brainchip Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Brainchip Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Horseshoe Metals and Brainchip Holdings

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

The idea behind Horseshoe Metals and Brainchip Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.