Correlation Between IShares Canadian and Brookfield

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

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

Diversification Opportunities for IShares Canadian and Brookfield

0.47

Correlation Coefficient

IShares Canadian  Brookfield

Very weak diversification

The 3 months correlation between IShares and Brookfield is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and IShares Canadian 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 Canadian HYBrid 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 Canadian i.e., IShares Canadian and Brookfield go up and down completely randomly.

Pair Corralation between IShares Canadian and Brookfield

Assuming the 90 days trading horizon IShares Canadian is expected to generate 2.95 times less return on investment than Brookfield. But when comparing it to its historical volatility, iShares Canadian HYBrid is 3.12 times less risky than Brookfield. It trades about 0.17 of its potential returns per unit of risk. Brookfield is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Brookfield on June 20, 2024 and sell it today you would earn a total of  627.00  from holding Brookfield or generate 36.93% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Brookfield

iShares Canadian HYBrid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian 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 Canadian and Brookfield

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

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.