Correlation Between Bri Chem and Millbank Mining
Can any of the company-specific risk be diversified away by investing in both Bri Chem and Millbank Mining 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 Bri Chem and Millbank Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bri Chem Corp and Millbank Mining Corp, you can compare the effects of market volatilities on Bri Chem and Millbank Mining 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 Bri Chem with a short position of Millbank Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and Millbank Mining.
Diversification Opportunities for Bri Chem and Millbank Mining
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bri and Millbank is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and Millbank Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millbank Mining Corp and Bri Chem 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 Bri Chem Corp are associated (or correlated) with Millbank Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millbank Mining Corp has no effect on the direction of Bri Chem i.e., Bri Chem and Millbank Mining go up and down completely randomly.
Pair Corralation between Bri Chem and Millbank Mining
Assuming the 90 days trading horizon Bri Chem is expected to generate 3.74 times less return on investment than Millbank Mining. But when comparing it to its historical volatility, Bri Chem Corp is 2.4 times less risky than Millbank Mining. It trades about 0.1 of its potential returns per unit of risk. Millbank Mining Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 7.50 in Millbank Mining Corp on September 19, 2024 and sell it today you would earn a total of 39.50 from holding Millbank Mining Corp or generate 526.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bri Chem Corp vs. Millbank Mining Corp
Performance |
| Timeline |
| Bri Chem Corp |
| Millbank Mining Corp |
Bri Chem and Millbank Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bri Chem and Millbank Mining
The main advantage of trading using opposite Bri Chem and Millbank Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bri Chem position performs unexpectedly, Millbank Mining 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 Millbank Mining will offset losses from the drop in Millbank Mining's long position.The idea behind Bri Chem Corp and Millbank Mining Corp 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.| Millbank Mining vs. Foraco International SA | Millbank Mining vs. Geodrill Limited | Millbank Mining vs. Bri Chem Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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