Correlation Between Automotive Finco and Brookfield Business

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

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

Diversification Opportunities for Automotive Finco and Brookfield Business

0.01

Correlation Coefficient

Automotive Finco  Brookfield Business

Significant diversification

The 3 months correlation between Automotive and Brookfield is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Finco Corp and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and Automotive Finco 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 Automotive Finco Corp are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of Automotive Finco i.e., Automotive Finco and Brookfield Business go up and down completely randomly.

Pair Corralation between Automotive Finco and Brookfield Business

Assuming the 90 days trading horizon Automotive Finco is expected to generate 23.53 times less return on investment than Brookfield Business. In addition to that, Automotive Finco is 2.12 times more volatile than Brookfield Business Partners. It trades about 0.0 of its total potential returns per unit of risk. Brookfield Business Partners is currently generating about 0.08 per unit of volatility. If you would invest  3,201  in Brookfield Business Partners on December 27, 2024 and sell it today you would earn a total of  290.00  from holding Brookfield Business Partners or generate 9.06% return on investment over 90 days.

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

Automotive Finco Corp  vs.  Brookfield Business Partners

Automotive Finco Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automotive Finco Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automotive Finco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Business

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Brookfield Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Automotive Finco and Brookfield Business

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

The idea behind Automotive Finco Corp and Brookfield Business Partners 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.