Correlation Between Advanced Braking and Flagship Investments
Can any of the company-specific risk be diversified away by investing in both Advanced Braking and Flagship Investments 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 Advanced Braking and Flagship Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Braking Technology and Flagship Investments, you can compare the effects of market volatilities on Advanced Braking and Flagship Investments 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 Advanced Braking with a short position of Flagship Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Flagship Investments.
Diversification Opportunities for Advanced Braking and Flagship Investments
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Advanced and Flagship is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Flagship Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flagship Investments and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Flagship Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flagship Investments has no effect on the direction of Advanced Braking i.e., Advanced Braking and Flagship Investments go up and down completely randomly.
Pair Corralation between Advanced Braking and Flagship Investments
Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 2.02 times more return on investment than Flagship Investments. However, Advanced Braking is 2.02 times more volatile than Flagship Investments. It trades about 0.1 of its potential returns per unit of risk. Flagship Investments is currently generating about 0.04 per unit of risk. If you would invest 5.60 in Advanced Braking Technology on August 25, 2024 and sell it today you would earn a total of 3.30 from holding Advanced Braking Technology or generate 58.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advanced Braking Technology vs. Flagship Investments
Performance |
| Timeline |
| Advanced Braking Tec |
| Flagship Investments |
Advanced Braking and Flagship Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Braking and Flagship Investments
The main advantage of trading using opposite Advanced Braking and Flagship Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Braking position performs unexpectedly, Flagship Investments 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 Flagship Investments will offset losses from the drop in Flagship Investments' long position.| Advanced Braking vs. Insignia Financial | Advanced Braking vs. Commonwealth Bank of | Advanced Braking vs. Kingsrose Mining | Advanced Braking vs. National Australia Bank |
| Flagship Investments vs. Advanced Braking Technology | Flagship Investments vs. Neurotech International | Flagship Investments vs. Lendlease Group | Flagship Investments vs. Energy Technologies Limited |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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