Correlation Between Brompton Split and Life Banc

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

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

Diversification Opportunities for Brompton Split and Life Banc

0.72

Correlation Coefficient

Brompton Split  Life Banc

Poor diversification

The 3 months correlation between Brompton and Life is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Split Banc and Life Banc Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Banc Split and Brompton Split 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 Brompton Split Banc are associated (or correlated) with Life Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Banc Split has no effect on the direction of Brompton Split i.e., Brompton Split and Life Banc go up and down completely randomly.

Pair Corralation between Brompton Split and Life Banc

Assuming the 90 days trading horizon Brompton Split Banc is expected to under-perform the Life Banc. But the stock apears to be less risky and, when comparing its historical volatility, Brompton Split Banc is 1.47 times less risky than Life Banc. The stock trades about -0.09 of its potential returns per unit of risk. The Life Banc Split is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Life Banc Split on December 30, 2024 and sell it today you would lose (46.00) from holding Life Banc Split or give up 5.19% of portfolio value over 90 days.

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

Brompton Split Banc  vs.  Life Banc Split

Brompton Split Banc

Risk-Adjusted Performance

Very Weak

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

Life Banc Split

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Brompton Split and Life Banc

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

The idea behind Brompton Split Banc and Life Banc Split 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.