Correlation Between AS Latvijas and Brown Forman

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

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

Diversification Opportunities for AS Latvijas and Brown Forman

-0.58

Correlation Coefficient

AS Latvijas  Brown Forman

Excellent diversification

The 3 months correlation between UM9 and Brown is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding AS Latvijas balzams and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and AS Latvijas 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 AS Latvijas balzams 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 AS Latvijas i.e., AS Latvijas and Brown Forman go up and down completely randomly.

Pair Corralation between AS Latvijas and Brown Forman

Assuming the 90 days trading horizon AS Latvijas balzams is expected to generate 0.28 times more return on investment than Brown Forman. However, AS Latvijas balzams is 3.56 times less risky than Brown Forman. It trades about 0.08 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest  833.00  in AS Latvijas balzams on December 10, 2024 and sell it today you would earn a total of  52.00  from holding AS Latvijas balzams or generate 6.24% return on investment over 90 days.

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

AS Latvijas balzams  vs.  Brown Forman

AS Latvijas balzams

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AS Latvijas and Brown Forman

The main advantage of trading using opposite AS Latvijas and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AS Latvijas 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 AS Latvijas balzams 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.