Correlation Between Heavitree Brewery and Norman Broadbent

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

By analyzing existing cross correlation between Heavitree Brewery and Norman Broadbent Plc, you can compare the effects of market volatilities on Heavitree Brewery and Norman Broadbent 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 Heavitree Brewery with a short position of Norman Broadbent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heavitree Brewery and Norman Broadbent.

Diversification Opportunities for Heavitree Brewery and Norman Broadbent

0.77

Correlation Coefficient

Heavitree Brewery  Norman Broadbent

Poor diversification

The 3 months correlation between Heavitree and Norman is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Heavitree Brewery and Norman Broadbent Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norman Broadbent Plc and Heavitree Brewery 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 Heavitree Brewery are associated (or correlated) with Norman Broadbent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norman Broadbent Plc has no effect on the direction of Heavitree Brewery i.e., Heavitree Brewery and Norman Broadbent go up and down completely randomly.

Pair Corralation between Heavitree Brewery and Norman Broadbent

Assuming the 90 days trading horizon Heavitree Brewery is expected to generate 0.13 times more return on investment than Norman Broadbent. However, Heavitree Brewery is 7.82 times less risky than Norman Broadbent. It trades about -0.16 of its potential returns per unit of risk. Norman Broadbent Plc is currently generating about -0.29 per unit of risk. If you would invest  29,000  in Heavitree Brewery on October 9, 2024 and sell it today you would lose (1,000.00) from holding Heavitree Brewery or give up 3.45% of portfolio value over 90 days.

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

Heavitree Brewery  vs.  Norman Broadbent Plc

Heavitree Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heavitree Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Heavitree Brewery is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Norman Broadbent Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norman Broadbent Plc 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Heavitree Brewery and Norman Broadbent

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

The idea behind Heavitree Brewery and Norman Broadbent 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.