Correlation Between PAX Global and Brother Industries

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

By analyzing existing cross correlation between PAX Global Technology and Brother Industries, you can compare the effects of market volatilities on PAX Global and Brother Industries 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 PAX Global with a short position of Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of PAX Global and Brother Industries.

Diversification Opportunities for PAX Global and Brother Industries

-0.49

Correlation Coefficient

PAX Global  Brother Industries

Very good diversification

The 3 months correlation between PAX and Brother is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding PAX Global Technology and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries and PAX Global 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 PAX Global Technology are associated (or correlated) with Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of PAX Global i.e., PAX Global and Brother Industries go up and down completely randomly.

Pair Corralation between PAX Global and Brother Industries

Assuming the 90 days horizon PAX Global Technology is expected to generate 2.09 times more return on investment than Brother Industries. However, PAX Global is 2.09 times more volatile than Brother Industries. It trades about 0.14 of its potential returns per unit of risk. Brother Industries is currently generating about 0.02 per unit of risk. If you would invest  51.00  in PAX Global Technology on April 22, 2025 and sell it today you would earn a total of  18.00  from holding PAX Global Technology or generate 35.29% return on investment over 90 days.

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

PAX Global Technology  vs.  Brother Industries

PAX Global Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PAX Global Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PAX Global reported solid returns over the last few months and may actually be approaching a breakup point.

Brother Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brother Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brother Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PAX Global and Brother Industries

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

The idea behind PAX Global Technology and Brother Industries 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.