Correlation Between Brand and Endymed

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

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

Diversification Opportunities for Brand and Endymed

0.67

Correlation Coefficient

Brand  Endymed

Poor diversification

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

Pair Corralation between Brand and Endymed

Assuming the 90 days trading horizon Brand Group is expected to generate 0.85 times more return on investment than Endymed. However, Brand Group is 1.18 times less risky than Endymed. It trades about 0.22 of its potential returns per unit of risk. Endymed is currently generating about -0.03 per unit of risk. If you would invest  26,760  in Brand Group on September 29, 2024 and sell it today you would earn a total of  2,040  from holding Brand Group or generate 7.62% return on investment over 90 days.

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

Brand Group  vs.  Endymed

Brand Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brand Group are ranked lower than 19 (%) 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.

Endymed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Endymed are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Endymed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brand and Endymed

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

The idea behind Brand Group and Endymed 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.