Correlation Between South32 and Brimstone Investment

Can any of the company-specific risk be diversified away by investing in both South32 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 South32 and Brimstone Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South32 and Brimstone Investment, you can compare the effects of market volatilities on South32 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 South32 with a short position of Brimstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of South32 and Brimstone Investment.

Diversification Opportunities for South32 and Brimstone Investment

0.53

Correlation Coefficient

South32  Brimstone Investment

Very weak diversification

The 3 months correlation between South32 and Brimstone is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding South32 and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone Investment and South32 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 South32 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 South32 i.e., South32 and Brimstone Investment go up and down completely randomly.

Pair Corralation between South32 and Brimstone Investment

If you would invest  390,000  in South32 on October 23, 2024 and sell it today you would earn a total of  24,000  from holding South32 or generate 6.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

South32  vs.  Brimstone Investment

South32

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South32 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, South32 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brimstone Investment

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with South32 and Brimstone Investment

The main advantage of trading using opposite South32 and Brimstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South32 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 South32 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.