Correlation Between USA Equities and Brainsway

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

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

Diversification Opportunities for USA Equities and Brainsway

-0.28

Correlation Coefficient

USA Equities  Brainsway

Very good diversification

The 3 months correlation between USA and Brainsway is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding USA Equities Corp and Brainsway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brainsway and USA Equities 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 USA Equities Corp are associated (or correlated) with Brainsway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brainsway has no effect on the direction of USA Equities i.e., USA Equities and Brainsway go up and down completely randomly.

Pair Corralation between USA Equities and Brainsway

Given the investment horizon of 90 days USA Equities Corp is expected to generate 4.3 times more return on investment than Brainsway. However, USA Equities is 4.3 times more volatile than Brainsway. It trades about 0.06 of its potential returns per unit of risk. Brainsway is currently generating about 0.02 per unit of risk. If you would invest  26.00  in USA Equities Corp on December 28, 2024 and sell it today you would lose (1.00) from holding USA Equities Corp or give up 3.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

USA Equities Corp  vs.  Brainsway

USA Equities Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in USA Equities Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, USA Equities reported solid returns over the last few months and may actually be approaching a breakup point.

Brainsway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Brainsway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with USA Equities and Brainsway

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

The idea behind USA Equities Corp and Brainsway 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.