Correlation Between Brandes Core and Brandes Small
Can any of the company-specific risk be diversified away by investing in both Brandes Core and Brandes Small 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 Brandes Core and Brandes Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brandes E Plus and Brandes Small Cap, you can compare the effects of market volatilities on Brandes Core and Brandes Small 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 Brandes Core with a short position of Brandes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes Core and Brandes Small.
Diversification Opportunities for Brandes Core and Brandes Small
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brandes and Brandes is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Brandes E Plus and Brandes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Small Cap and Brandes Core 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 Brandes E Plus are associated (or correlated) with Brandes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Small Cap has no effect on the direction of Brandes Core i.e., Brandes Core and Brandes Small go up and down completely randomly.
Pair Corralation between Brandes Core and Brandes Small
Assuming the 90 days horizon Brandes E Plus is expected to generate 0.28 times more return on investment than Brandes Small. However, Brandes E Plus is 3.55 times less risky than Brandes Small. It trades about 0.29 of its potential returns per unit of risk. Brandes Small Cap is currently generating about -0.21 per unit of risk. If you would invest 828.00 in Brandes E Plus on November 28, 2024 and sell it today you would earn a total of 13.00 from holding Brandes E Plus or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brandes E Plus vs. Brandes Small Cap
Performance |
| Timeline |
| Brandes E Plus |
| Brandes Small Cap |
Brandes Core and Brandes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brandes Core and Brandes Small
The main advantage of trading using opposite Brandes Core and Brandes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes Core position performs unexpectedly, Brandes Small 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 Small will offset losses from the drop in Brandes Small's long position.| Brandes Core vs. Guidemark E Fixed | Brandes Core vs. Gmo Quality Fund | Brandes Core vs. Barings Active Short | Brandes Core vs. Credit Suisse Multialternative |
| Brandes Small vs. Brandes Small Cap | Brandes Small vs. Brandes Small Cap | Brandes Small vs. Brandes E Plus | Brandes Small vs. Brandes E Plus |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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