Correlation Between Air Canada and Brookfield Asset

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

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

Diversification Opportunities for Air Canada and Brookfield Asset

0.61

Correlation Coefficient

Air Canada  Brookfield Asset

Poor diversification

The 3 months correlation between Air and Brookfield is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada 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 Air Canada 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 Air Canada 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 Air Canada i.e., Air Canada and Brookfield Asset go up and down completely randomly.

Pair Corralation between Air Canada and Brookfield Asset

Assuming the 90 days horizon Air Canada is expected to under-perform the Brookfield Asset. In addition to that, Air Canada is 2.13 times more volatile than Brookfield Asset Management. It trades about -0.39 of its total potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.05 per unit of volatility. If you would invest  1,218  in Brookfield Asset Management on December 31, 2024 and sell it today you would lose (35.00) from holding Brookfield Asset Management or give up 2.87% of portfolio value over 90 days.

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

Air Canada  vs.  Brookfield Asset Management

Air Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Brookfield Asset Man

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Air Canada and Brookfield Asset

The main advantage of trading using opposite Air Canada and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada 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 Air Canada 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.