Correlation Between Brompton Lifeco and GreenFirst Forest

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

By analyzing existing cross correlation between Brompton Lifeco Split and GreenFirst Forest Products, you can compare the effects of market volatilities on Brompton Lifeco and GreenFirst Forest 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 Brompton Lifeco with a short position of GreenFirst Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Lifeco and GreenFirst Forest.

Diversification Opportunities for Brompton Lifeco and GreenFirst Forest

0.4

Correlation Coefficient

Brompton Lifeco  GreenFirst Forest

Very weak diversification

The 3 months correlation between Brompton and GreenFirst is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Lifeco Split and GreenFirst Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenFirst Forest and Brompton Lifeco 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 Brompton Lifeco Split are associated (or correlated) with GreenFirst Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenFirst Forest has no effect on the direction of Brompton Lifeco i.e., Brompton Lifeco and GreenFirst Forest go up and down completely randomly.

Pair Corralation between Brompton Lifeco and GreenFirst Forest

Assuming the 90 days trading horizon Brompton Lifeco Split is expected to generate 0.75 times more return on investment than GreenFirst Forest. However, Brompton Lifeco Split is 1.33 times less risky than GreenFirst Forest. It trades about 0.0 of its potential returns per unit of risk. GreenFirst Forest Products is currently generating about -0.16 per unit of risk. If you would invest  827.00  in Brompton Lifeco Split on December 24, 2024 and sell it today you would lose (8.00) from holding Brompton Lifeco Split or give up 0.97% of portfolio value over 90 days.

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

Brompton Lifeco Split  vs.  GreenFirst Forest Products

Brompton Lifeco Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brompton Lifeco Split has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton Lifeco is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

GreenFirst Forest

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenFirst Forest Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brompton Lifeco and GreenFirst Forest

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

The idea behind Brompton Lifeco Split and GreenFirst Forest Products 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 Transaction History module to view history of all your transactions and understand their impact on performance.