Correlation Between Brandes International and Brandes International
Can any of the company-specific risk be diversified away by investing in both Brandes International and Brandes International 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 International and Brandes International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brandes International Small and Brandes International Small, you can compare the effects of market volatilities on Brandes International and Brandes International 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 International with a short position of Brandes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandes International and Brandes International.
Diversification Opportunities for Brandes International and Brandes International
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brandes and Brandes is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Brandes International Small and Brandes International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes International and Brandes International 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 International Small are associated (or correlated) with Brandes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes International has no effect on the direction of Brandes International i.e., Brandes International and Brandes International go up and down completely randomly.
Pair Corralation between Brandes International and Brandes International
Assuming the 90 days horizon Brandes International Small is expected to under-perform the Brandes International. In addition to that, Brandes International is 1.01 times more volatile than Brandes International Small. It trades about -0.15 of its total potential returns per unit of risk. Brandes International Small is currently generating about -0.14 per unit of volatility. If you would invest 1,860 in Brandes International Small on August 30, 2024 and sell it today you would lose (58.00) from holding Brandes International Small or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
Brandes International Small vs. Brandes International Small
Performance |
| Timeline |
| Brandes International |
| Brandes International |
Brandes International and Brandes International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brandes International and Brandes International
The main advantage of trading using opposite Brandes International and Brandes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brandes International position performs unexpectedly, Brandes International 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 International will offset losses from the drop in Brandes International's long position.The idea behind Brandes International Small and Brandes International Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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