Correlation Between Air Canada and Brookfield Office

Can any of the company-specific risk be diversified away by investing in both Air Canada and Brookfield Office 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 Office 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 Office Properties, you can compare the effects of market volatilities on Air Canada and Brookfield Office 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 Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Brookfield Office.

Diversification Opportunities for Air Canada and Brookfield Office

0.76

Correlation Coefficient

Air Canada  Brookfield Office

Poor diversification

The 3 months correlation between Air and Brookfield is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office 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 Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Office has no effect on the direction of Air Canada i.e., Air Canada and Brookfield Office go up and down completely randomly.

Pair Corralation between Air Canada and Brookfield Office

Assuming the 90 days horizon Air Canada is expected to under-perform the Brookfield Office. In addition to that, Air Canada is 1.65 times more volatile than Brookfield Office Properties. It trades about -0.18 of its total potential returns per unit of risk. Brookfield Office Properties is currently generating about -0.13 per unit of volatility. If you would invest  1,740  in Brookfield Office Properties on October 1, 2024 and sell it today you would lose (68.00) from holding Brookfield Office Properties or give up 3.91% 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 Office Properties

Air Canada

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Office

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air Canada and Brookfield Office

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

The idea behind Air Canada and Brookfield Office Properties 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.