Correlation Between Brimag L and Golan Plastic

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

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

Diversification Opportunities for Brimag L and Golan Plastic

0.89

Correlation Coefficient

Brimag L  Golan Plastic

Very poor diversification

The 3 months correlation between Brimag and Golan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Brimag L and Golan Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golan Plastic and Brimag L 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 Brimag L are associated (or correlated) with Golan Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golan Plastic has no effect on the direction of Brimag L i.e., Brimag L and Golan Plastic go up and down completely randomly.

Pair Corralation between Brimag L and Golan Plastic

Assuming the 90 days trading horizon Brimag L is expected to generate 1.0 times less return on investment than Golan Plastic. In addition to that, Brimag L is 1.56 times more volatile than Golan Plastic. It trades about 0.36 of its total potential returns per unit of risk. Golan Plastic is currently generating about 0.56 per unit of volatility. If you would invest  106,000  in Golan Plastic on September 17, 2024 and sell it today you would earn a total of  30,600  from holding Golan Plastic or generate 28.87% return on investment over 90 days.

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

Brimag L  vs.  Golan Plastic

Brimag L

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brimag L are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brimag L sustained solid returns over the last few months and may actually be approaching a breakup point.

Golan Plastic

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Golan Plastic are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Golan Plastic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brimag L and Golan Plastic

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

The idea behind Brimag L and Golan Plastic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.