Correlation Between Vodka Brands and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Vodka Brands and Brown Forman 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 Vodka Brands and Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodka Brands Corp and Brown Forman, you can compare the effects of market volatilities on Vodka Brands and Brown Forman 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 Vodka Brands with a short position of Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodka Brands and Brown Forman.
Diversification Opportunities for Vodka Brands and Brown Forman
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vodka and Brown is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and Vodka Brands 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 Vodka Brands Corp are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Vodka Brands i.e., Vodka Brands and Brown Forman go up and down completely randomly.
Pair Corralation between Vodka Brands and Brown Forman
Given the investment horizon of 90 days Vodka Brands Corp is expected to generate 5.82 times more return on investment than Brown Forman. However, Vodka Brands is 5.82 times more volatile than Brown Forman. It trades about 0.03 of its potential returns per unit of risk. Brown Forman is currently generating about -0.06 per unit of risk. If you would invest 200.00 in Vodka Brands Corp on September 2, 2024 and sell it today you would lose (88.00) from holding Vodka Brands Corp or give up 44.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vodka Brands Corp vs. Brown Forman
Performance |
| Timeline |
| Vodka Brands Corp |
| Brown Forman |
Vodka Brands and Brown Forman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodka Brands and Brown Forman
The main advantage of trading using opposite Vodka Brands and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.| Vodka Brands vs. Diageo PLC ADR | Vodka Brands vs. Pernod Ricard SA | Vodka Brands vs. Constellation Brands Class | Vodka Brands vs. Brown Forman |
| Brown Forman vs. MGP Ingredients | Brown Forman vs. Diageo PLC ADR | Brown Forman vs. Constellation Brands Class | Brown Forman vs. Duckhorn Portfolio |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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