Correlation Between Brown Forman and Iconic Brands
Can any of the company-specific risk be diversified away by investing in both Brown Forman and Iconic Brands 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 Brown Forman and Iconic Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brown Forman and Iconic Brands, you can compare the effects of market volatilities on Brown Forman and Iconic Brands 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 Brown Forman with a short position of Iconic Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brown Forman and Iconic Brands.
Diversification Opportunities for Brown Forman and Iconic Brands
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Brown and Iconic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brown Forman and Iconic Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iconic Brands and Brown Forman 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 Brown Forman are associated (or correlated) with Iconic Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iconic Brands has no effect on the direction of Brown Forman i.e., Brown Forman and Iconic Brands go up and down completely randomly.
Pair Corralation between Brown Forman and Iconic Brands
Given the investment horizon of 90 days Brown Forman is expected to under-perform the Iconic Brands. But the stock apears to be less risky and, when comparing its historical volatility, Brown Forman is 87.28 times less risky than Iconic Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Iconic Brands is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Iconic Brands on August 28, 2024 and sell it today you would lose (12.99) from holding Iconic Brands or give up 99.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brown Forman vs. Iconic Brands
Performance |
| Timeline |
| Brown Forman |
| Iconic Brands |
Brown Forman and Iconic Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brown Forman and Iconic Brands
The main advantage of trading using opposite Brown Forman and Iconic Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brown Forman position performs unexpectedly, Iconic Brands 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 Iconic Brands will offset losses from the drop in Iconic Brands' long position.| Brown Forman vs. MGP Ingredients | Brown Forman vs. Diageo PLC ADR | Brown Forman vs. Constellation Brands Class | Brown Forman vs. Duckhorn Portfolio |
| Iconic Brands vs. Aristocrat Group Corp | Iconic Brands vs. Becle SA de | Iconic Brands vs. Naked Wines plc | Iconic Brands vs. Willamette Valley Vineyards |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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