Correlation Between Brompton Split and Premium Income

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

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

Diversification Opportunities for Brompton Split and Premium Income

0.84

Correlation Coefficient

Brompton Split  Premium Income

Very poor diversification

The 3 months correlation between Brompton and Premium is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Brompton Split Banc and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income and Brompton Split 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 Brompton Split Banc are associated (or correlated) with Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of Brompton Split i.e., Brompton Split and Premium Income go up and down completely randomly.

Pair Corralation between Brompton Split and Premium Income

Assuming the 90 days trading horizon Brompton Split is expected to generate 1.31 times less return on investment than Premium Income. In addition to that, Brompton Split is 1.16 times more volatile than Premium Income. It trades about 0.18 of its total potential returns per unit of risk. Premium Income is currently generating about 0.27 per unit of volatility. If you would invest  492.00  in Premium Income on March 29, 2025 and sell it today you would earn a total of  127.00  from holding Premium Income or generate 25.81% return on investment over 90 days.

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

Brompton Split Banc  vs.  Premium Income

Brompton Split Banc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Split Banc are ranked lower than 14 (%) 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.

Premium Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Income are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premium Income unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brompton Split and Premium Income

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

The idea behind Brompton Split Banc and Premium Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.