Correlation Between Brainsway and Human Xtensions

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

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

Diversification Opportunities for Brainsway and Human Xtensions

-0.67

Correlation Coefficient

Brainsway  Human Xtensions

Excellent diversification

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

Pair Corralation between Brainsway and Human Xtensions

Assuming the 90 days trading horizon Brainsway is expected to generate 0.55 times more return on investment than Human Xtensions. However, Brainsway is 1.81 times less risky than Human Xtensions. It trades about 0.14 of its potential returns per unit of risk. Human Xtensions is currently generating about -0.01 per unit of risk. If you would invest  112,500  in Brainsway on September 29, 2024 and sell it today you would earn a total of  62,100  from holding Brainsway or generate 55.2% return on investment over 90 days.

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

Brainsway  vs.  Human Xtensions

Brainsway

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brainsway may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Human Xtensions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Human Xtensions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Brainsway and Human Xtensions

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

The idea behind Brainsway and Human Xtensions 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.