Correlation Between ADT and Brinks
Can any of the company-specific risk be diversified away by investing in both ADT and Brinks 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 ADT and Brinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADT Inc and Brinks Company, you can compare the effects of market volatilities on ADT and Brinks 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 ADT with a short position of Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADT and Brinks.
Diversification Opportunities for ADT and Brinks
Very weak diversification
The 3 months correlation between ADT and Brinks is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ADT Inc and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and ADT 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 ADT Inc are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of ADT i.e., ADT and Brinks go up and down completely randomly.
Pair Corralation between ADT and Brinks
Considering the 90-day investment horizon ADT Inc is expected to generate 1.5 times more return on investment than Brinks. However, ADT is 1.5 times more volatile than Brinks Company. It trades about 0.05 of its potential returns per unit of risk. Brinks Company is currently generating about -0.06 per unit of risk. If you would invest 703.00 in ADT Inc on November 2, 2024 and sell it today you would earn a total of 73.00 from holding ADT Inc or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADT Inc vs. Brinks Company
Performance |
| Timeline |
| ADT Inc |
| Brinks Company |
ADT and Brinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADT and Brinks
The main advantage of trading using opposite ADT and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADT position performs unexpectedly, Brinks 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 Brinks will offset losses from the drop in Brinks' long position.The idea behind ADT Inc and Brinks Company 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.| Brinks vs. MSA Safety | Brinks vs. Resideo Technologies | Brinks vs. Mistras Group | Brinks vs. NL Industries |
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 Stocks Directory module to find actively traded stocks across global markets.
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