Correlation Between Life Banc and Brompton Split

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

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

Diversification Opportunities for Life Banc and Brompton Split

0.86

Correlation Coefficient

Life Banc  Brompton Split

Very poor diversification

The 3 months correlation between Life and Brompton is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Life Banc Split and Brompton Split Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Split Banc and Life Banc 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 Life Banc Split are associated (or correlated) with Brompton Split. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Split Banc has no effect on the direction of Life Banc i.e., Life Banc and Brompton Split go up and down completely randomly.

Pair Corralation between Life Banc and Brompton Split

Assuming the 90 days trading horizon Life Banc Split is expected to generate 0.67 times more return on investment than Brompton Split. However, Life Banc Split is 1.48 times less risky than Brompton Split. It trades about 0.7 of its potential returns per unit of risk. Brompton Split Banc is currently generating about 0.21 per unit of risk. If you would invest  839.00  in Life Banc Split on September 4, 2024 and sell it today you would earn a total of  113.00  from holding Life Banc Split or generate 13.47% return on investment over 90 days.

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

Life Banc Split  vs.  Brompton Split Banc

Life Banc Split

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Life Banc Split are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Life Banc displayed solid returns over the last few months and may actually be approaching a breakup point.

Brompton Split Banc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Split Banc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Brompton Split displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life Banc and Brompton Split

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

The idea behind Life Banc Split and Brompton Split Banc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.