Correlation Between Brand and Ashtrom

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

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

Diversification Opportunities for Brand and Ashtrom

0.83

Correlation Coefficient

Brand  Ashtrom

Very poor diversification

The 3 months correlation between Brand and Ashtrom is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Brand Group and Ashtrom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtrom Group and Brand 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 Brand Group are associated (or correlated) with Ashtrom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtrom Group has no effect on the direction of Brand i.e., Brand and Ashtrom go up and down completely randomly.

Pair Corralation between Brand and Ashtrom

Assuming the 90 days trading horizon Brand is expected to generate 1.49 times less return on investment than Ashtrom. In addition to that, Brand is 1.1 times more volatile than Ashtrom Group. It trades about 0.12 of its total potential returns per unit of risk. Ashtrom Group is currently generating about 0.2 per unit of volatility. If you would invest  427,100  in Ashtrom Group on September 26, 2024 and sell it today you would earn a total of  232,200  from holding Ashtrom Group or generate 54.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.96%
Values	Daily Returns

Brand Group  vs.  Ashtrom Group

Brand Group

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brand Group are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brand sustained solid returns over the last few months and may actually be approaching a breakup point.

Ashtrom Group

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtrom Group are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ashtrom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brand and Ashtrom

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

The idea behind Brand Group and Ashtrom 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.