Correlation Between Profire Ene and Bri Chem

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

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

Diversification Opportunities for Profire Ene and Bri Chem

-0.92

Correlation Coefficient

Profire Ene  Bri Chem

Pay attention - limited upside

The 3 months correlation between Profire and Bri is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Profire Ene and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and Profire Ene 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 Profire Ene are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Profire Ene i.e., Profire Ene and Bri Chem go up and down completely randomly.

Pair Corralation between Profire Ene and Bri Chem

Given the investment horizon of 90 days Profire Ene is expected to generate 63.73 times less return on investment than Bri Chem. But when comparing it to its historical volatility, Profire Ene is 22.9 times less risky than Bri Chem. It trades about 0.17 of its potential returns per unit of risk. Bri Chem Corp is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Bri Chem Corp on September 5, 2024 and sell it today you would earn a total of  7.00  from holding Bri Chem Corp or generate 58.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Profire Ene  vs.  Bri Chem Corp

Profire Ene

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profire Ene are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, Profire Ene exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bri Chem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bri Chem Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bri Chem is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Profire Ene and Bri Chem

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

The idea behind Profire Ene and Bri Chem Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.