Correlation Between Brickworks and Pro Medicus

Can any of the company-specific risk be diversified away by investing in both Brickworks and Pro Medicus 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 Brickworks and Pro Medicus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brickworks and Pro Medicus, you can compare the effects of market volatilities on Brickworks and Pro Medicus 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 Brickworks with a short position of Pro Medicus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brickworks and Pro Medicus.

Diversification Opportunities for Brickworks and Pro Medicus

-0.67

Correlation Coefficient

Brickworks  Pro Medicus

Excellent diversification

The 3 months correlation between Brickworks and Pro is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Brickworks and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus and Brickworks 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 Brickworks are associated (or correlated) with Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of Brickworks i.e., Brickworks and Pro Medicus go up and down completely randomly.

Pair Corralation between Brickworks and Pro Medicus

Assuming the 90 days trading horizon Brickworks is expected to under-perform the Pro Medicus. But the stock apears to be less risky and, when comparing its historical volatility, Brickworks is 1.96 times less risky than Pro Medicus. The stock trades about -0.01 of its potential returns per unit of risk. The Pro Medicus is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,552  in Pro Medicus on September 24, 2024 and sell it today you would earn a total of  15,313  from holding Pro Medicus or generate 160.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Brickworks  vs.  Pro Medicus

Brickworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Brickworks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pro Medicus

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Pro Medicus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brickworks and Pro Medicus

The main advantage of trading using opposite Brickworks and Pro Medicus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brickworks position performs unexpectedly, Pro Medicus 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 Pro Medicus will offset losses from the drop in Pro Medicus' long position.

The idea behind Brickworks and Pro Medicus 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.

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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.