Correlation Between Octodec and Brimstone Investment

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

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

Diversification Opportunities for Octodec and Brimstone Investment

0.68

Correlation Coefficient

Octodec  Brimstone Investment

Poor diversification

The 3 months correlation between Octodec and Brimstone is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Octodec and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone Investment and Octodec 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 Octodec are associated (or correlated) with Brimstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimstone Investment has no effect on the direction of Octodec i.e., Octodec and Brimstone Investment go up and down completely randomly.

Pair Corralation between Octodec and Brimstone Investment

Assuming the 90 days trading horizon Octodec is expected to generate 0.51 times more return on investment than Brimstone Investment. However, Octodec is 1.96 times less risky than Brimstone Investment. It trades about -0.17 of its potential returns per unit of risk. Brimstone Investment is currently generating about -0.1 per unit of risk. If you would invest  115,000  in Octodec on December 25, 2024 and sell it today you would lose (12,300) from holding Octodec or give up 10.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Octodec  vs.  Brimstone Investment

Octodec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Octodec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Brimstone Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brimstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Octodec and Brimstone Investment

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

The idea behind Octodec and Brimstone Investment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.