Correlation Between Brady and Bridger Aerospace

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

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

Diversification Opportunities for Brady and Bridger Aerospace

-0.25

Correlation Coefficient

Brady  Bridger Aerospace

Very good diversification

The 3 months correlation between Brady and Bridger is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Brady and Bridger Aerospace Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridger Aerospace and Brady 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 Brady are associated (or correlated) with Bridger Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridger Aerospace has no effect on the direction of Brady i.e., Brady and Bridger Aerospace go up and down completely randomly.

Pair Corralation between Brady and Bridger Aerospace

Considering the 90-day investment horizon Brady is expected to generate 53.34 times less return on investment than Bridger Aerospace. But when comparing it to its historical volatility, Brady is 59.08 times less risky than Bridger Aerospace. It trades about 0.09 of its potential returns per unit of risk. Bridger Aerospace Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  35.00  in Bridger Aerospace Group on August 31, 2024 and sell it today you would lose (26.00) from holding Bridger Aerospace Group or give up 74.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.41%
Values	Daily Returns

Brady  vs.  Bridger Aerospace Group

Brady

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brady are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brady is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bridger Aerospace

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridger Aerospace Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bridger Aerospace showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brady and Bridger Aerospace

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

The idea behind Brady and Bridger Aerospace 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.