Correlation Between Challenger and Brookfield Asset
Can any of the company-specific risk be diversified away by investing in both Challenger and Brookfield Asset 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 Challenger and Brookfield Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Challenger Ltd ADR and Brookfield Asset Management, you can compare the effects of market volatilities on Challenger and Brookfield Asset 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 Challenger with a short position of Brookfield Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Challenger and Brookfield Asset.
Diversification Opportunities for Challenger and Brookfield Asset
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Challenger and Brookfield is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Challenger Ltd ADR and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and Challenger 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 Challenger Ltd ADR are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Challenger i.e., Challenger and Brookfield Asset go up and down completely randomly.
Pair Corralation between Challenger and Brookfield Asset
Assuming the 90 days horizon Challenger Ltd ADR is expected to generate 1.53 times more return on investment than Brookfield Asset. However, Challenger is 1.53 times more volatile than Brookfield Asset Management. It trades about 0.02 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.01 per unit of risk. If you would invest 4,509 in Challenger Ltd ADR on January 20, 2024 and sell it today you would lose (139.00) from holding Challenger Ltd ADR or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Challenger Ltd ADR vs. Brookfield Asset Management
Performance |
| Timeline |
| Challenger ADR |
| Brookfield Asset Man |
Challenger and Brookfield Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Challenger and Brookfield Asset
The main advantage of trading using opposite Challenger and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Challenger position performs unexpectedly, Brookfield Asset 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 Brookfield Asset will offset losses from the drop in Brookfield Asset's long position.| Challenger vs. Targa Resources | Challenger vs. AZZ Incorporated | Challenger vs. Alphabet Inc Class C | Challenger vs. Delta Air Lines |
| Brookfield Asset vs. KKR Co LP | Brookfield Asset vs. Blackstone Group | Brookfield Asset vs. Apollo Global Management | Brookfield Asset vs. T Rowe Price |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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