Correlation Between Brady and CompX International
Can any of the company-specific risk be diversified away by investing in both Brady and CompX 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 Brady and CompX International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brady and CompX International, you can compare the effects of market volatilities on Brady and CompX 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 Brady with a short position of CompX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brady and CompX International.
Diversification Opportunities for Brady and CompX International
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brady and CompX is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Brady and CompX International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompX International and Brady 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 Brady are associated (or correlated) with CompX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompX International has no effect on the direction of Brady i.e., Brady and CompX International go up and down completely randomly.
Pair Corralation between Brady and CompX International
Considering the 90-day investment horizon Brady is expected to generate 1.9 times less return on investment than CompX International. But when comparing it to its historical volatility, Brady is 3.72 times less risky than CompX International. It trades about 0.09 of its potential returns per unit of risk. CompX International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,130 in CompX International on August 24, 2024 and sell it today you would earn a total of 651.00 from holding CompX International or generate 30.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brady vs. CompX International
Performance |
| Timeline |
| Brady |
| CompX International |
Brady and CompX International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brady and CompX International
The main advantage of trading using opposite Brady and CompX International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brady position performs unexpectedly, CompX 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 CompX International will offset losses from the drop in CompX International's long position.The idea behind Brady and CompX International 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.| CompX International vs. NL Industries | CompX International vs. Eastern Co | CompX International vs. CF Financial | CompX International vs. Bar Harbor Bankshares |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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