Correlation Between Supercom and Brady

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

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

Diversification Opportunities for Supercom and Brady

0.08

Correlation Coefficient

Supercom  Brady

Significant diversification

The 3 months correlation between Supercom and Brady is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Supercom and Brady in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brady and Supercom 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 Supercom are associated (or correlated) with Brady. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brady has no effect on the direction of Supercom i.e., Supercom and Brady go up and down completely randomly.

Pair Corralation between Supercom and Brady

Given the investment horizon of 90 days Supercom is expected to under-perform the Brady. In addition to that, Supercom is 3.45 times more volatile than Brady. It trades about -0.01 of its total potential returns per unit of risk. Brady is currently generating about 0.1 per unit of volatility. If you would invest  5,917  in Brady on September 24, 2024 and sell it today you would earn a total of  1,496  from holding Brady or generate 25.28% return on investment over 90 days.

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

Supercom  vs.  Brady

Supercom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supercom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Supercom is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brady

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Supercom and Brady

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

The idea behind Supercom and Brady 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..