Correlation Between Koninklijke Philips and BrainsWay

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

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

Diversification Opportunities for Koninklijke Philips and BrainsWay

-0.47

Correlation Coefficient

Koninklijke Philips  BrainsWay

Very good diversification

The 3 months correlation between Koninklijke and BrainsWay is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV and BrainsWay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrainsWay and Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and BrainsWay go up and down completely randomly.

Pair Corralation between Koninklijke Philips and BrainsWay

Considering the 90-day investment horizon Koninklijke Philips is expected to generate 5.78 times less return on investment than BrainsWay. But when comparing it to its historical volatility, Koninklijke Philips NV is 4.57 times less risky than BrainsWay. It trades about 0.06 of its potential returns per unit of risk. BrainsWay is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  90.00  in BrainsWay on September 26, 2024 and sell it today you would earn a total of  763.00  from holding BrainsWay or generate 847.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Koninklijke Philips NV  vs.  BrainsWay

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BrainsWay

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrainsWay are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, BrainsWay reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Philips and BrainsWay

The main advantage of trading using opposite Koninklijke Philips and BrainsWay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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 Koninklijke Philips NV 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.