Correlation Between Brookfield Office and Bip Investment

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Can any of the company-specific risk be diversified away by investing in both Brookfield Office and Bip Investment 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 Office and Bip Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Office Properties and Bip Investment Corp, you can compare the effects of market volatilities on Brookfield Office and Bip Investment 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 Office with a short position of Bip Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Office and Bip Investment.

Diversification Opportunities for Brookfield Office and Bip Investment

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brookfield and Bip is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp and Brookfield Office 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 Office Properties are associated (or correlated) with Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of Brookfield Office i.e., Brookfield Office and Bip Investment go up and down completely randomly.

Pair Corralation between Brookfield Office and Bip Investment

Assuming the 90 days trading horizon Brookfield Office Properties is expected to generate 1.27 times more return on investment than Bip Investment. However, Brookfield Office is 1.27 times more volatile than Bip Investment Corp. It trades about 0.14 of its potential returns per unit of risk. Bip Investment Corp is currently generating about 0.12 per unit of risk. If you would invest  1,309  in Brookfield Office Properties on August 16, 2024 and sell it today you would earn a total of  250.00  from holding Brookfield Office Properties or generate 19.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brookfield Office Properties  vs.  Bip Investment Corp

 Performance 
       Timeline  
Brookfield Office 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Office sustained solid returns over the last few months and may actually be approaching a breakup point.
Bip Investment Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward-looking signals, Bip Investment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Brookfield Office and Bip Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brookfield Office and Bip Investment

The main advantage of trading using opposite Brookfield Office and Bip Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Office position performs unexpectedly, Bip Investment 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 Bip Investment will offset losses from the drop in Bip Investment's long position.
The idea behind Brookfield Office Properties and Bip Investment Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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