Correlation Between Brompton Split and Prime Dividend

Can any of the company-specific risk be diversified away by investing in both Brompton Split and Prime Dividend 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 Prime Dividend 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 Prime Dividend Corp, you can compare the effects of market volatilities on Brompton Split and Prime Dividend 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 Prime Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Split and Prime Dividend.

Diversification Opportunities for Brompton Split and Prime Dividend

0.33

Correlation Coefficient

Brompton Split  Prime Dividend

Weak diversification

The 3 months correlation between Brompton and Prime is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Split Banc and Prime Dividend Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Dividend Corp 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 Prime Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Dividend Corp has no effect on the direction of Brompton Split i.e., Brompton Split and Prime Dividend go up and down completely randomly.

Pair Corralation between Brompton Split and Prime Dividend

Assuming the 90 days trading horizon Brompton Split Banc is expected to generate 1.2 times more return on investment than Prime Dividend. However, Brompton Split is 1.2 times more volatile than Prime Dividend Corp. It trades about -0.22 of its potential returns per unit of risk. Prime Dividend Corp is currently generating about -0.31 per unit of risk. If you would invest  1,051  in Brompton Split Banc on October 8, 2024 and sell it today you would lose (45.00) from holding Brompton Split Banc or give up 4.28% of portfolio value over 90 days.

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

Brompton Split Banc  vs.  Prime Dividend Corp

Brompton Split Banc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Split Banc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Prime Dividend Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Dividend Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Prime Dividend displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brompton Split and Prime Dividend

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

The idea behind Brompton Split Banc and Prime Dividend 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.