Correlation Between Brompton North and CI Lawrence
Can any of the company-specific risk be diversified away by investing in both Brompton North and CI Lawrence 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 Brompton North and CI Lawrence into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton North American and CI Lawrence Park, you can compare the effects of market volatilities on Brompton North and CI Lawrence 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 Brompton North with a short position of CI Lawrence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton North and CI Lawrence.
Diversification Opportunities for Brompton North and CI Lawrence
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brompton and CRED is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Brompton North American and CI Lawrence Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Lawrence Park and Brompton North 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 Brompton North American are associated (or correlated) with CI Lawrence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Lawrence Park has no effect on the direction of Brompton North i.e., Brompton North and CI Lawrence go up and down completely randomly.
Pair Corralation between Brompton North and CI Lawrence
Assuming the 90 days trading horizon Brompton North American is expected to generate 14.44 times more return on investment than CI Lawrence. However, Brompton North is 14.44 times more volatile than CI Lawrence Park. It trades about 0.27 of its potential returns per unit of risk. CI Lawrence Park is currently generating about 0.51 per unit of risk. If you would invest 2,365 in Brompton North American on September 1, 2024 and sell it today you would earn a total of 262.00 from holding Brompton North American or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brompton North American vs. CI Lawrence Park
Performance |
| Timeline |
| Brompton North American |
| CI Lawrence Park |
Brompton North and CI Lawrence Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton North and CI Lawrence
The main advantage of trading using opposite Brompton North and CI Lawrence positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton North position performs unexpectedly, CI Lawrence 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 CI Lawrence will offset losses from the drop in CI Lawrence's long position.| Brompton North vs. Brompton Global Dividend | Brompton North vs. Tech Leaders Income | Brompton North vs. Global Healthcare Income | Brompton North vs. Brompton European Dividend |
| CI Lawrence vs. Brompton Global Dividend | CI Lawrence vs. Global Healthcare Income | CI Lawrence vs. Tech Leaders Income | CI Lawrence vs. Brompton North American |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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