Correlation Between Emeren and Brookfield Business

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

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

Diversification Opportunities for Emeren and Brookfield Business

0.05

Correlation Coefficient

Emeren  Brookfield Business

Significant diversification

The 3 months correlation between Emeren and Brookfield is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Emeren Group and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and Emeren 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 Emeren Group are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of Emeren i.e., Emeren and Brookfield Business go up and down completely randomly.

Pair Corralation between Emeren and Brookfield Business

Considering the 90-day investment horizon Emeren Group is expected to generate 3.75 times more return on investment than Brookfield Business. However, Emeren is 3.75 times more volatile than Brookfield Business Partners. It trades about -0.03 of its potential returns per unit of risk. Brookfield Business Partners is currently generating about -0.15 per unit of risk. If you would invest  223.00  in Emeren Group on January 30, 2024 and sell it today you would lose (34.00) from holding Emeren Group or give up 15.25% of portfolio value over 90 days.

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

Emeren Group  vs.  Brookfield Business Partners

Emeren Group

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emeren Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Emeren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Business Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Emeren and Brookfield Business

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

The idea behind Emeren Group and Brookfield Business Partners 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.