Correlation Between Brompton Lifeco and North American

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

By analyzing existing cross correlation between Brompton Lifeco Split and North American Financial, you can compare the effects of market volatilities on Brompton Lifeco and North American 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 Lifeco with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton Lifeco and North American.

Diversification Opportunities for Brompton Lifeco and North American

0.93

Correlation Coefficient

Brompton Lifeco  North American

Almost no diversification

The 3 months correlation between Brompton and North is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Lifeco Split and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and Brompton Lifeco 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 Lifeco Split are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Brompton Lifeco i.e., Brompton Lifeco and North American go up and down completely randomly.

Pair Corralation between Brompton Lifeco and North American

Assuming the 90 days trading horizon Brompton Lifeco is expected to generate 1.08 times less return on investment than North American. But when comparing it to its historical volatility, Brompton Lifeco Split is 1.16 times less risky than North American. It trades about 0.1 of its potential returns per unit of risk. North American Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  352.00  in North American Financial on September 12, 2024 and sell it today you would earn a total of  375.00  from holding North American Financial or generate 106.53% return on investment over 90 days.

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

Brompton Lifeco Split  vs.  North American Financial

Brompton Lifeco Split

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Lifeco Split are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brompton Lifeco displayed solid returns over the last few months and may actually be approaching a breakup point.

North American Financial

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brompton Lifeco and North American

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

The idea behind Brompton Lifeco Split and North American Financial 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.