Correlation Between United Tractors and Brown Forman

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

By analyzing existing cross correlation between United Tractors Tbk and Brown Forman, you can compare the effects of market volatilities on United Tractors and Brown Forman 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 United Tractors with a short position of Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Tractors and Brown Forman.

Diversification Opportunities for United Tractors and Brown Forman

-0.64

Correlation Coefficient

United Tractors  Brown Forman

Excellent diversification

The 3 months correlation between United and Brown is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding United Tractors Tbk and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and United Tractors 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 United Tractors Tbk are associated (or correlated) with Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of United Tractors i.e., United Tractors and Brown Forman go up and down completely randomly.

Pair Corralation between United Tractors and Brown Forman

Assuming the 90 days horizon United Tractors Tbk is expected to generate 1.57 times more return on investment than Brown Forman. However, United Tractors is 1.57 times more volatile than Brown Forman. It trades about -0.03 of its potential returns per unit of risk. Brown Forman is currently generating about -0.32 per unit of risk. If you would invest  3,099  in United Tractors Tbk on February 5, 2024 and sell it today you would lose (89.00) from holding United Tractors Tbk or give up 2.87% of portfolio value over 90 days.

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

United Tractors Tbk  vs.  Brown Forman

United Tractors Tbk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Tractors Tbk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, United Tractors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brown Forman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United Tractors and Brown Forman

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

The idea behind United Tractors Tbk and Brown Forman 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.