Correlation Between Brookfield and African Metals

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

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

Diversification Opportunities for Brookfield and African Metals

0.0

Correlation Coefficient

Brookfield  African Metals

Pay attention - limited upside

The 3 months correlation between Brookfield and African is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and African Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Metals and Brookfield 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 are associated (or correlated) with African Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Metals has no effect on the direction of Brookfield i.e., Brookfield and African Metals go up and down completely randomly.

Pair Corralation between Brookfield and African Metals

If you would invest  0.00  in African Metals on March 18, 2024 and sell it today you would earn a total of  0.00  from holding African Metals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

Brookfield  vs.  African Metals

Brookfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

African Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days African Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, African Metals is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Brookfield and African Metals

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

The idea behind Brookfield and African Metals 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.