Correlation Between IShares SPTSX and Brookfield

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

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

Diversification Opportunities for IShares SPTSX and Brookfield

0.19

Correlation Coefficient

IShares SPTSX  Brookfield

Average diversification

The 3 months correlation between IShares and Brookfield is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding iShares SPTSX Capped and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and IShares SPTSX 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 iShares SPTSX Capped are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and Brookfield go up and down completely randomly.

Pair Corralation between IShares SPTSX and Brookfield

Assuming the 90 days trading horizon IShares SPTSX is expected to generate 6.37 times less return on investment than Brookfield. In addition to that, IShares SPTSX is 1.29 times more volatile than Brookfield. It trades about 0.02 of its total potential returns per unit of risk. Brookfield is currently generating about 0.13 per unit of volatility. If you would invest  1,662  in Brookfield on June 20, 2024 and sell it today you would earn a total of  663.00  from holding Brookfield or generate 39.89% return on investment over 90 days.

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

iShares SPTSX Capped  vs.  Brookfield

iShares SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with IShares SPTSX and Brookfield

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

The idea behind iShares SPTSX Capped and Brookfield 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.