Correlation Between Neto Malinda and Brainsway

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

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

Diversification Opportunities for Neto Malinda and Brainsway

0.8

Correlation Coefficient

Neto Malinda  Brainsway

Very poor diversification

The 3 months correlation between Neto and Brainsway is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Neto Malinda and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and Neto Malinda 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 Neto Malinda 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 Neto Malinda i.e., Neto Malinda and Brainsway go up and down completely randomly.

Pair Corralation between Neto Malinda and Brainsway

Assuming the 90 days trading horizon Neto Malinda is expected to generate 1.02 times less return on investment than Brainsway. But when comparing it to its historical volatility, Neto Malinda is 1.75 times less risky than Brainsway. It trades about 0.31 of its potential returns per unit of risk. Brainsway is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  141,000  in Brainsway on August 31, 2024 and sell it today you would earn a total of  35,100  from holding Brainsway or generate 24.89% return on investment over 90 days.

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

Neto Malinda  vs.  Brainsway

Neto Malinda

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neto Malinda are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Neto Malinda sustained solid returns over the last few months and may actually be approaching a breakup point.

Brainsway

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brainsway sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neto Malinda and Brainsway

The main advantage of trading using opposite Neto Malinda and Brainsway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neto Malinda 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 Neto Malinda 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.