Correlation Between Brompton European and NeuPath Health

Can any of the company-specific risk be diversified away by investing in both Brompton European and NeuPath Health 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 NeuPath Health 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 NeuPath Health, you can compare the effects of market volatilities on Brompton European and NeuPath Health 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 NeuPath Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and NeuPath Health.

Diversification Opportunities for Brompton European and NeuPath Health

-0.3

Correlation Coefficient

Brompton European  NeuPath Health

Very good diversification

The 3 months correlation between Brompton and NeuPath is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend and NeuPath Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuPath Health 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 NeuPath Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuPath Health has no effect on the direction of Brompton European i.e., Brompton European and NeuPath Health go up and down completely randomly.

Pair Corralation between Brompton European and NeuPath Health

Assuming the 90 days trading horizon Brompton European is expected to generate 2.32 times less return on investment than NeuPath Health. But when comparing it to its historical volatility, Brompton European Dividend is 5.14 times less risky than NeuPath Health. It trades about 0.06 of its potential returns per unit of risk. NeuPath Health is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16.00  in NeuPath Health on August 31, 2024 and sell it today you would earn a total of  1.00  from holding NeuPath Health or generate 6.25% return on investment over 90 days.

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

Brompton European Dividend  vs.  NeuPath Health

Brompton European

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton European Dividend are ranked lower than 1 (%) 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.

NeuPath Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NeuPath Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Brompton European and NeuPath Health

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

The idea behind Brompton European Dividend and NeuPath Health 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.