Correlation Between Brookfield Asset and LPL Financial

Can any of the company-specific risk be diversified away by investing in both Brookfield Asset and LPL Financial 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 Asset and LPL Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brookfield Asset Management and LPL Financial Holdings, you can compare the effects of market volatilities on Brookfield Asset and LPL Financial 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 Asset with a short position of LPL Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Asset and LPL Financial.

Diversification Opportunities for Brookfield Asset and LPL Financial

0.57

Correlation Coefficient

Brookfield Asset  LPL Financial

Very weak diversification

The 3 months correlation between Brookfield and LPL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and LPL Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPL Financial Holdings and Brookfield Asset 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 Asset Management are associated (or correlated) with LPL Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPL Financial Holdings has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and LPL Financial go up and down completely randomly.

Pair Corralation between Brookfield Asset and LPL Financial

Considering the 90-day investment horizon Brookfield Asset Management is expected to under-perform the LPL Financial. In addition to that, Brookfield Asset is 1.11 times more volatile than LPL Financial Holdings. It trades about -0.04 of its total potential returns per unit of risk. LPL Financial Holdings is currently generating about 0.03 per unit of volatility. If you would invest  26,306  in LPL Financial Holdings on January 24, 2024 and sell it today you would earn a total of  384.00  from holding LPL Financial Holdings or generate 1.46% return on investment over 90 days.

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

Brookfield Asset Management  vs.  LPL Financial Holdings

Brookfield Asset Man

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brookfield Asset is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

LPL Financial Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, LPL Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Brookfield Asset and LPL Financial

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

The idea behind Brookfield Asset Management and LPL Financial Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.