Correlation Between Brompton European and Auxly Cannabis

Specify exactly 2 symbols:
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 Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Brompton European Dividend  vs.  Auxly Cannabis Group

 Performance 
       Timeline  
Brompton European 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Auxly Cannabis Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Auxly Cannabis Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Auxly Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind Brompton European Dividend and Auxly Cannabis Group 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.
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.

Other Complementary Tools

ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Piotroski F Score
Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets