Correlation Between Power Financial and Brompton European
Can any of the company-specific risk be diversified away by investing in both Power Financial and Brompton European 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 Power Financial and Brompton European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial Corp and Brompton European Dividend, you can compare the effects of market volatilities on Power Financial and Brompton European 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 Power Financial with a short position of Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Brompton European.
Diversification Opportunities for Power Financial and Brompton European
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Power and Brompton is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial Corp and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and Power Financial 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 Power Financial Corp are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of Power Financial i.e., Power Financial and Brompton European go up and down completely randomly.
Pair Corralation between Power Financial and Brompton European
Assuming the 90 days trading horizon Power Financial Corp is expected to generate 0.87 times more return on investment than Brompton European. However, Power Financial Corp is 1.15 times less risky than Brompton European. It trades about 0.1 of its potential returns per unit of risk. Brompton European Dividend is currently generating about 0.04 per unit of risk. If you would invest 1,552 in Power Financial Corp on September 12, 2024 and sell it today you would earn a total of 116.00 from holding Power Financial Corp or generate 7.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Financial Corp vs. Brompton European Dividend
Performance |
| Timeline |
| Power Financial Corp |
| Brompton European |
Power Financial and Brompton European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Brompton European
The main advantage of trading using opposite Power Financial and Brompton European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial position performs unexpectedly, Brompton European 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 Brompton European will offset losses from the drop in Brompton European's long position.| Power Financial vs. Data Communications Management | Power Financial vs. Leons Furniture Limited | Power Financial vs. Eddy Smart Home | Power Financial vs. MTY Food Group |
| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
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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