Correlation Between Brand and Rotshtein

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

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

Diversification Opportunities for Brand and Rotshtein

0.68

Correlation Coefficient

Brand  Rotshtein

Poor diversification

The 3 months correlation between Brand and Rotshtein is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Brand Group and Rotshtein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotshtein 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 Rotshtein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotshtein has no effect on the direction of Brand i.e., Brand and Rotshtein go up and down completely randomly.

Pair Corralation between Brand and Rotshtein

Assuming the 90 days trading horizon Brand is expected to generate 1.12 times less return on investment than Rotshtein. But when comparing it to its historical volatility, Brand Group is 1.06 times less risky than Rotshtein. It trades about 0.25 of its potential returns per unit of risk. Rotshtein is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  451,502  in Rotshtein on September 27, 2024 and sell it today you would earn a total of  131,498  from holding Rotshtein or generate 29.12% 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.  Rotshtein

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.

Rotshtein

Risk-Adjusted Performance

21 of 100

Solid

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

Pair Trading with Brand and Rotshtein

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

The idea behind Brand Group and Rotshtein 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.