Correlation Between Splash Beverage and Brown Forman

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

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

Diversification Opportunities for Splash Beverage and Brown Forman

-0.23

Correlation Coefficient

Splash Beverage  Brown Forman

Very good diversification

The 3 months correlation between Splash and Brown is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Splash Beverage Group and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and Splash Beverage 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 Splash Beverage Group are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Splash Beverage i.e., Splash Beverage and Brown Forman go up and down completely randomly.

Pair Corralation between Splash Beverage and Brown Forman

Given the investment horizon of 90 days Splash Beverage Group is expected to generate 3.81 times more return on investment than Brown Forman. However, Splash Beverage is 3.81 times more volatile than Brown Forman. It trades about 0.01 of its potential returns per unit of risk. Brown Forman is currently generating about -0.14 per unit of risk. If you would invest  19.00  in Splash Beverage Group on December 4, 2024 and sell it today you would lose (3.00) from holding Splash Beverage Group or give up 15.79% of portfolio value over 90 days.

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

Splash Beverage Group  vs.  Brown Forman

Splash Beverage Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Splash Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Splash Beverage is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Splash Beverage and Brown Forman

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

The idea behind Splash Beverage Group and Brown Forman 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.