Correlation Between Apple and Brookfield

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

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

Diversification Opportunities for Apple and Brookfield

-0.36

Correlation Coefficient

Apple  Brookfield

Very good diversification

The 3 months correlation between Apple and Brookfield is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Apple 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 Apple Inc CDR 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 Apple i.e., Apple and Brookfield go up and down completely randomly.

Pair Corralation between Apple and Brookfield

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 1.68 times more return on investment than Brookfield. However, Apple is 1.68 times more volatile than Brookfield. It trades about 0.09 of its potential returns per unit of risk. Brookfield is currently generating about 0.03 per unit of risk. If you would invest  2,015  in Apple Inc CDR on October 9, 2024 and sell it today you would earn a total of  1,570  from holding Apple Inc CDR or generate 77.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Apple Inc CDR  vs.  Brookfield

Apple Inc CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Brookfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Brookfield is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Apple and Brookfield

The main advantage of trading using opposite Apple and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc CDR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.