Correlation Between Brompton European and Auxly Cannabis
Can any of the company-specific risk be diversified away by investing in both Brompton European and Auxly Cannabis 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 European and Auxly Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton European Dividend and Auxly Cannabis Group, you can compare the effects of market volatilities on Brompton European and Auxly Cannabis 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 European with a short position of Auxly Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and Auxly Cannabis.
Diversification Opportunities for Brompton European and Auxly Cannabis
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Brompton and Auxly is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Auxly Cannabis Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auxly Cannabis Group and Brompton European 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 European Dividend are associated (or correlated) with Auxly Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auxly Cannabis Group has no effect on the direction of Brompton European i.e., Brompton European and Auxly Cannabis go up and down completely randomly.
Pair Corralation between Brompton European and Auxly Cannabis
Assuming the 90 days trading horizon Brompton European is expected to generate 25.42 times less return on investment than Auxly Cannabis. But when comparing it to its historical volatility, Brompton European Dividend is 17.72 times less risky than Auxly Cannabis. It trades about 0.06 of its potential returns per unit of risk. Auxly Cannabis Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.50 in Auxly Cannabis Group on September 2, 2024 and sell it today you would earn a total of 1.50 from holding Auxly Cannabis Group or generate 60.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Brompton European Dividend vs. Auxly Cannabis Group
Performance |
Timeline |
Brompton European |
Auxly Cannabis Group |
Brompton European and Auxly Cannabis Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Brompton European and Auxly Cannabis
The main advantage of trading using opposite Brompton European and Auxly Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European position performs unexpectedly, Auxly Cannabis 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 Auxly Cannabis will offset losses from the drop in Auxly Cannabis' long position.Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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