Correlation Between Planet Labs and Brinks

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

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

Diversification Opportunities for Planet Labs and Brinks

-0.04

Correlation Coefficient

Planet Labs  Brinks

Good diversification

The 3 months correlation between Planet and Brinks is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Planet Labs PBC and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and Planet Labs 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 Planet Labs PBC are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of Planet Labs i.e., Planet Labs and Brinks go up and down completely randomly.

Pair Corralation between Planet Labs and Brinks

Allowing for the 90-day total investment horizon Planet Labs PBC is expected to generate 4.17 times more return on investment than Brinks. However, Planet Labs is 4.17 times more volatile than Brinks Company. It trades about 0.06 of its potential returns per unit of risk. Brinks Company is currently generating about -0.02 per unit of risk. If you would invest  393.00  in Planet Labs PBC on November 28, 2024 and sell it today you would earn a total of  46.00  from holding Planet Labs PBC or generate 11.7% return on investment over 90 days.

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

Planet Labs PBC  vs.  Brinks Company

Planet Labs PBC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Brinks Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinks Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Planet Labs and Brinks

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

The idea behind Planet Labs PBC and Brinks Company 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.