Correlation Between CN MODERN and Brown Forman
Can any of the company-specific risk be diversified away by investing in both CN MODERN 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 CN MODERN and Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Brown Forman, you can compare the effects of market volatilities on CN MODERN 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 CN MODERN with a short position of Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Brown Forman.
Diversification Opportunities for CN MODERN and Brown Forman
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between 07M and Brown is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and CN MODERN 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 CN MODERN DAIRY 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 CN MODERN i.e., CN MODERN and Brown Forman go up and down completely randomly.
Pair Corralation between CN MODERN and Brown Forman
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.72 times more return on investment than Brown Forman. However, CN MODERN is 1.72 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 -0.06 per unit of risk. If you would invest 9.27 in CN MODERN DAIRY on September 3, 2024 and sell it today you would lose (0.02) from holding CN MODERN DAIRY or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Brown Forman
Performance |
| Timeline |
| CN MODERN DAIRY |
| Brown Forman |
CN MODERN and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Brown Forman
The main advantage of trading using opposite CN MODERN and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN 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 CN MODERN DAIRY 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.| Brown Forman vs. GEAR4MUSIC LS 10 | Brown Forman vs. Evolution Mining Limited | Brown Forman vs. Hemisphere Energy Corp | Brown Forman vs. UNIVERSAL MUSIC GROUP |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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