Correlation Between Brandes Global and Brandes Small
Can any of the company-specific risk be diversified away by investing in both Brandes Global 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 Global 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 Global Equity and Brandes Small Cap, you can compare the effects of market volatilities on Brandes Global 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 Global with a short position of Brandes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes Global and Brandes Small.
Diversification Opportunities for Brandes Global and Brandes Small
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brandes and Brandes is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Brandes Global Equity 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 Global 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 Global Equity 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 Global i.e., Brandes Global and Brandes Small go up and down completely randomly.
Pair Corralation between Brandes Global and Brandes Small
Assuming the 90 days horizon Brandes Global is expected to generate 1.46 times less return on investment than Brandes Small. But when comparing it to its historical volatility, Brandes Global Equity is 1.35 times less risky than Brandes Small. It trades about 0.09 of its potential returns per unit of risk. Brandes Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,121 in Brandes Small Cap on August 30, 2024 and sell it today you would earn a total of 658.00 from holding Brandes Small Cap or generate 58.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brandes Global Equity vs. Brandes Small Cap
Performance |
| Timeline |
| Brandes Global Equity |
| Brandes Small Cap |
Brandes Global and Brandes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brandes Global and Brandes Small
The main advantage of trading using opposite Brandes Global and Brandes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes Global 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 Global vs. Firsthand Alternative Energy | Brandes Global vs. World Energy Fund | Brandes Global vs. Goldman Sachs Mlp | Brandes Global vs. Gmo Resources |
| Brandes Small vs. Pgim Jennison Diversified | Brandes Small vs. Guggenheim Diversified Income | Brandes Small vs. T Rowe Price | Brandes Small vs. Delaware Limited Term Diversified |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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