Correlation Between Brookfield Business and Capital World
Can any of the company-specific risk be diversified away by investing in both Brookfield Business and Capital World 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 Brookfield Business and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Partners and Capital World Growth, you can compare the effects of market volatilities on Brookfield Business and Capital World 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 Brookfield Business with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Capital World.
Diversification Opportunities for Brookfield Business and Capital World
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Brookfield and Capital is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Brookfield Business 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 Brookfield Business Partners are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Brookfield Business i.e., Brookfield Business and Capital World go up and down completely randomly.
Pair Corralation between Brookfield Business and Capital World
Considering the 90-day investment horizon Brookfield Business Partners is expected to under-perform the Capital World. In addition to that, Brookfield Business is 2.36 times more volatile than Capital World Growth. It trades about -0.27 of its total potential returns per unit of risk. Capital World Growth is currently generating about -0.12 per unit of volatility. If you would invest 6,441 in Capital World Growth on January 26, 2024 and sell it today you would lose (119.00) from holding Capital World Growth or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Business Partners vs. Capital World Growth
Performance |
| Timeline |
| Brookfield Business |
| Capital World Growth |
Brookfield Business and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Business and Capital World
The main advantage of trading using opposite Brookfield Business and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Brookfield Business vs. Steel Partners Holdings | Brookfield Business vs. Compass Diversified | Brookfield Business vs. Matthews International | Brookfield Business vs. Tejon Ranch Co |
| Capital World vs. American Funds Capital | Capital World vs. American Funds Capital | Capital World vs. Capital World Growth | Capital World vs. Capital World Growth |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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