Correlation Between Brompton European and Hammond Manufacturing

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

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

Diversification Opportunities for Brompton European and Hammond Manufacturing

0.27

Correlation Coefficient

Brompton European  Hammond Manufacturing

Modest diversification

The 3 months correlation between Brompton and Hammond is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and Hammond Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Manufacturing and Brompton European 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 Brompton European Dividend are associated (or correlated) with Hammond Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Manufacturing has no effect on the direction of Brompton European i.e., Brompton European and Hammond Manufacturing go up and down completely randomly.

Pair Corralation between Brompton European and Hammond Manufacturing

Assuming the 90 days trading horizon Brompton European Dividend is expected to under-perform the Hammond Manufacturing. But the etf apears to be less risky and, when comparing its historical volatility, Brompton European Dividend is 1.14 times less risky than Hammond Manufacturing. The etf trades about 0.0 of its potential returns per unit of risk. The Hammond Manufacturing is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Hammond Manufacturing on September 2, 2024 and sell it today you would earn a total of  65.00  from holding Hammond Manufacturing or generate 6.63% return on investment over 90 days.

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

Brompton European Dividend  vs.  Hammond Manufacturing

Brompton European

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hammond Manufacturing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hammond Manufacturing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Hammond Manufacturing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brompton European and Hammond Manufacturing

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

The idea behind Brompton European Dividend and Hammond Manufacturing 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.