Correlation Between Westport Fuel and Brookfield Business

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

Diversification Opportunities for Westport Fuel and Brookfield Business

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Westport and Brookfield is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and Westport Fuel 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 Westport Fuel Systems 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 Westport Fuel i.e., Westport Fuel and Brookfield Business go up and down completely randomly.

Pair Corralation between Westport Fuel and Brookfield Business

Given the investment horizon of 90 days Westport Fuel Systems is expected to generate 2.25 times more return on investment than Brookfield Business. However, Westport Fuel is 2.25 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 -0.01 per unit of risk. If you would invest  575.00  in Westport Fuel Systems on April 21, 2024 and sell it today you would earn a total of  20.00  from holding Westport Fuel Systems or generate 3.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Westport Fuel Systems  vs.  Brookfield Business Partners

 Performance 
       Timeline  
Westport Fuel Systems 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Westport Fuel Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westport Fuel may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Brookfield Business 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Brookfield Business is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Westport Fuel and Brookfield Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westport Fuel and Brookfield Business

The main advantage of trading using opposite Westport Fuel and Brookfield Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westport Fuel 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 Westport Fuel Systems 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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