Correlation Between Brookfield Business and FTAI Infrastructure

Can any of the company-specific risk be diversified away by investing in both Brookfield Business and FTAI Infrastructure 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 FTAI Infrastructure 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 FTAI Infrastructure, you can compare the effects of market volatilities on Brookfield Business and FTAI Infrastructure 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 FTAI Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and FTAI Infrastructure.

Diversification Opportunities for Brookfield Business and FTAI Infrastructure

0.42

Correlation Coefficient

Brookfield Business  FTAI Infrastructure

Very weak diversification

The 3 months correlation between Brookfield and FTAI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and FTAI Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTAI Infrastructure 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 FTAI Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTAI Infrastructure has no effect on the direction of Brookfield Business i.e., Brookfield Business and FTAI Infrastructure go up and down completely randomly.

Pair Corralation between Brookfield Business and FTAI Infrastructure

Considering the 90-day investment horizon Brookfield Business is expected to generate 3.59 times less return on investment than FTAI Infrastructure. But when comparing it to its historical volatility, Brookfield Business Partners is 1.4 times less risky than FTAI Infrastructure. It trades about 0.07 of its potential returns per unit of risk. FTAI Infrastructure is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  739.00  in FTAI Infrastructure on April 28, 2024 and sell it today you would earn a total of  258.00  from holding FTAI Infrastructure or generate 34.91% return on investment over 90 days.

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

Brookfield Business Partners  vs.  FTAI Infrastructure

Brookfield Business

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Brookfield Business may actually be approaching a critical reversion point that can send shares even higher in August 2024.

FTAI Infrastructure

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FTAI Infrastructure are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, FTAI Infrastructure reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Business and FTAI Infrastructure

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

The idea behind Brookfield Business Partners and FTAI Infrastructure 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.