Correlation Between Maple Leaf and Brainsway

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

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

Diversification Opportunities for Maple Leaf and Brainsway

0.29

Correlation Coefficient

Maple Leaf  Brainsway

Modest diversification

The 3 months correlation between Maple and Brainsway is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Green and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and Maple Leaf 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 Maple Leaf Green are associated (or correlated) with Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of Maple Leaf i.e., Maple Leaf and Brainsway go up and down completely randomly.

Pair Corralation between Maple Leaf and Brainsway

Assuming the 90 days horizon Maple Leaf Green is expected to generate 4.97 times more return on investment than Brainsway. However, Maple Leaf is 4.97 times more volatile than Brainsway. It trades about 0.09 of its potential returns per unit of risk. Brainsway is currently generating about 0.15 per unit of risk. If you would invest  3.00  in Maple Leaf Green on September 3, 2024 and sell it today you would earn a total of  0.20  from holding Maple Leaf Green or generate 6.67% return on investment over 90 days.

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

Maple Leaf Green  vs.  Brainsway

Maple Leaf Green

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Green are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Maple Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Brainsway

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Maple Leaf and Brainsway

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

The idea behind Maple Leaf Green and Brainsway 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.