Correlation Between Investor and Brookfield Asset

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

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

Diversification Opportunities for Investor and Brookfield Asset

0.74

Correlation Coefficient

Investor  Brookfield Asset

Poor diversification

The 3 months correlation between Investor and Brookfield is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB 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 Investor 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 Investor AB 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 Investor i.e., Investor and Brookfield Asset go up and down completely randomly.

Pair Corralation between Investor and Brookfield Asset

Assuming the 90 days horizon Investor AB is expected to under-perform the Brookfield Asset. But the pink sheet apears to be less risky and, when comparing its historical volatility, Investor AB is 1.2 times less risky than Brookfield Asset. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Brookfield Asset Management is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,068  in Brookfield Asset Management on January 25, 2024 and sell it today you would lose (150.00) from holding Brookfield Asset Management or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Investor AB  vs.  Brookfield Asset Management

Investor AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Investor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Brookfield Asset Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Investor and Brookfield Asset

The main advantage of trading using opposite Investor and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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.

The idea behind Investor AB and Brookfield Asset Management 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.