Correlation Between Vodka Brands and Brown Forman

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

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

Diversification Opportunities for Vodka Brands and Brown Forman

-0.28

Correlation Coefficient

Vodka Brands  Brown Forman

Very good diversification

The 3 months correlation between Vodka and Brown is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and Vodka Brands 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 Vodka Brands Corp 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 Vodka Brands i.e., Vodka Brands and Brown Forman go up and down completely randomly.

Pair Corralation between Vodka Brands and Brown Forman

If you would invest  179.00  in Vodka Brands Corp on February 21, 2024 and sell it today you would earn a total of  0.00  from holding Vodka Brands Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Vodka Brands Corp  vs.  Brown Forman

Vodka Brands Corp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Vodka Brands Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak forward-looking signals, Vodka Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 Vodka Brands and Brown Forman

The main advantage of trading using opposite Vodka Brands and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands 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 Vodka Brands Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.