Correlation Between Eastside Distilling and Brown Forman

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

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

Diversification Opportunities for Eastside Distilling and Brown Forman

-0.66

Correlation Coefficient

Eastside Distilling  Brown Forman

Excellent diversification

The 3 months correlation between Eastside and Brown is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eastside Distilling and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman and Eastside Distilling 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 Eastside Distilling 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 Eastside Distilling i.e., Eastside Distilling and Brown Forman go up and down completely randomly.

Pair Corralation between Eastside Distilling and Brown Forman

Given the investment horizon of 90 days Eastside Distilling is expected to under-perform the Brown Forman. In addition to that, Eastside Distilling is 5.63 times more volatile than Brown Forman. It trades about -0.32 of its total potential returns per unit of risk. Brown Forman is currently generating about 0.02 per unit of volatility. If you would invest  4,634  in Brown Forman on July 10, 2024 and sell it today you would earn a total of  26.00  from holding Brown Forman or generate 0.56% return on investment over 90 days.

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

Eastside Distilling  vs.  Brown Forman

Eastside Distilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastside Distilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Brown Forman

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brown Forman are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Brown Forman may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Eastside Distilling and Brown Forman

The main advantage of trading using opposite Eastside Distilling and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastside Distilling 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 Eastside Distilling 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.