Correlation Between Matricelf and Brill Shoe

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

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

Diversification Opportunities for Matricelf and Brill Shoe

0.47

Correlation Coefficient

Matricelf  Brill Shoe

Very weak diversification

The 3 months correlation between Matricelf and Brill is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Matricelf and Brill Shoe Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brill Shoe Industries and Matricelf 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 Matricelf are associated (or correlated) with Brill Shoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brill Shoe Industries has no effect on the direction of Matricelf i.e., Matricelf and Brill Shoe go up and down completely randomly.

Pair Corralation between Matricelf and Brill Shoe

Assuming the 90 days trading horizon Matricelf is expected to under-perform the Brill Shoe. But the stock apears to be less risky and, when comparing its historical volatility, Matricelf is 2.49 times less risky than Brill Shoe. The stock trades about -0.31 of its potential returns per unit of risk. The Brill Shoe Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  200,000  in Brill Shoe Industries on September 15, 2024 and sell it today you would earn a total of  30,000  from holding Brill Shoe Industries or generate 15.0% return on investment over 90 days.

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

Matricelf  vs.  Brill Shoe Industries

Matricelf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matricelf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Matricelf is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brill Shoe Industries

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brill Shoe Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brill Shoe sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matricelf and Brill Shoe

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

The idea behind Matricelf and Brill Shoe Industries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.