Correlation Between SOS and Brinks

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

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

Diversification Opportunities for SOS and Brinks

-0.69

Correlation Coefficient

SOS  Brinks

Excellent diversification

The 3 months correlation between SOS and Brinks is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding SOS Limited and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and SOS 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 SOS Limited are associated (or correlated) with Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Company has no effect on the direction of SOS i.e., SOS and Brinks go up and down completely randomly.

Pair Corralation between SOS and Brinks

Considering the 90-day investment horizon SOS is expected to generate 2.35 times less return on investment than Brinks. In addition to that, SOS is 2.69 times more volatile than Brinks Company. It trades about 0.05 of its total potential returns per unit of risk. Brinks Company is currently generating about 0.3 per unit of volatility. If you would invest  8,915  in Brinks Company on February 23, 2024 and sell it today you would earn a total of  1,011  from holding Brinks Company or generate 11.34% return on investment over 90 days.

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

SOS Limited  vs.  Brinks Company

SOS Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOS Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Brinks Company

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brinks Company are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Brinks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOS and Brinks

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

The idea behind SOS Limited and Brinks Company 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.