Correlation Between Brown Forman and Vodka Brands
Can any of the company-specific risk be diversified away by investing in both Brown Forman and Vodka 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 Vodka 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 Vodka Brands Corp, you can compare the effects of market volatilities on Brown Forman and Vodka 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 Vodka Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brown Forman and Vodka Brands.
Diversification Opportunities for Brown Forman and Vodka Brands
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Brown and Vodka is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Brown Forman and Vodka Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodka Brands Corp 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 Vodka Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodka Brands Corp has no effect on the direction of Brown Forman i.e., Brown Forman and Vodka Brands go up and down completely randomly.
Pair Corralation between Brown Forman and Vodka Brands
Given the investment horizon of 90 days Brown Forman is expected to under-perform the Vodka Brands. But the stock apears to be less risky and, when comparing its historical volatility, Brown Forman is 5.82 times less risky than Vodka Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Vodka Brands Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 200.00 in Vodka Brands Corp on September 2, 2024 and sell it today you would lose (88.00) from holding Vodka Brands Corp or give up 44.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Brown Forman vs. Vodka Brands Corp
Performance |
| Timeline |
| Brown Forman |
| Vodka Brands Corp |
Brown Forman and Vodka Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brown Forman and Vodka Brands
The main advantage of trading using opposite Brown Forman and Vodka Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brown Forman position performs unexpectedly, Vodka 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 Vodka Brands will offset losses from the drop in Vodka 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 |
| Vodka Brands vs. Diageo PLC ADR | Vodka Brands vs. Pernod Ricard SA | Vodka Brands vs. Constellation Brands Class | Vodka Brands vs. Brown Forman |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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