Correlation Between Scout Small and Brandes Separately

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

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

Diversification Opportunities for Scout Small and Brandes Separately

0.65

Correlation Coefficient

Scout Small  Brandes Separately

Poor diversification

The 3 months correlation between Scout and Brandes is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Scout Small Cap and Brandes Separately Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Separately and Scout Small 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 Scout Small Cap are associated (or correlated) with Brandes Separately. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Separately has no effect on the direction of Scout Small i.e., Scout Small and Brandes Separately go up and down completely randomly.

Pair Corralation between Scout Small and Brandes Separately

Assuming the 90 days horizon Scout Small Cap is expected to under-perform the Brandes Separately. In addition to that, Scout Small is 9.68 times more volatile than Brandes Separately Managed. It trades about -0.1 of its total potential returns per unit of risk. Brandes Separately Managed is currently generating about 0.05 per unit of volatility. If you would invest  783.00  in Brandes Separately Managed on October 20, 2024 and sell it today you would earn a total of  2.00  from holding Brandes Separately Managed or generate 0.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Scout Small Cap  vs.  Brandes Separately Managed

Scout Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scout Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Scout Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brandes Separately

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brandes Separately Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brandes Separately is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scout Small and Brandes Separately

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

The idea behind Scout Small Cap and Brandes Separately Managed 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.