Correlation Between Brady and Brinks

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Can any of the company-specific risk be diversified away by investing in both Brady 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 Brady and Brinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brady and Brinks Company, you can compare the effects of market volatilities on Brady 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 Brady with a short position of Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brady and Brinks.

Diversification Opportunities for Brady and Brinks

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Brady and Brinks is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Brady and Brinks Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Company and Brady 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 Brady 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 Brady i.e., Brady and Brinks go up and down completely randomly.

Pair Corralation between Brady and Brinks

Considering the 90-day investment horizon Brady is expected to generate 3.57 times less return on investment than Brinks. But when comparing it to its historical volatility, Brady is 1.4 times less risky than Brinks. It trades about 0.2 of its potential returns per unit of risk. Brinks Company is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  8,023  in Brinks Company on December 29, 2023 and sell it today you would earn a total of  1,090  from holding Brinks Company or generate 13.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

Brady  vs.  Brinks Company

 Performance 
       Timeline  
Brady 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Brady are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brady is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Brinks Company 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Brinks Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Brady and Brinks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brady and Brinks

The main advantage of trading using opposite Brady and Brinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brady 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 Brady 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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