Correlation Between State Street and Brookfield Asset

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

Diversification Opportunities for State Street and Brookfield Asset

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between State and Brookfield is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding State Street 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 State Street 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 State Street 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 State Street i.e., State Street and Brookfield Asset go up and down completely randomly.

Pair Corralation between State Street and Brookfield Asset

Assuming the 90 days trading horizon State Street is expected to generate 0.55 times more return on investment than Brookfield Asset. However, State Street is 1.83 times less risky than Brookfield Asset. It trades about 0.02 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.04 per unit of risk. If you would invest  2,305  in State Street on December 29, 2023 and sell it today you would earn a total of  145.00  from holding State Street or generate 6.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

State Street  vs.  Brookfield Asset Management

 Performance 
       Timeline  
State Street 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Brookfield Asset Man 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking signals, Brookfield Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

State Street and Brookfield Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with State Street and Brookfield Asset

The main advantage of trading using opposite State Street and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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 State Street 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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