Correlation Between Avista and Brookfield Infrastructure

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

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

Diversification Opportunities for Avista and Brookfield Infrastructure

-0.72

Correlation Coefficient

Avista  Brookfield Infrastructure

Pay attention - limited upside

The 3 months correlation between Avista and Brookfield is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Avista and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and Avista 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 Avista are associated (or correlated) with Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Avista i.e., Avista and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Avista and Brookfield Infrastructure

Considering the 90-day investment horizon Avista is expected to generate 0.76 times more return on investment than Brookfield Infrastructure. However, Avista is 1.31 times less risky than Brookfield Infrastructure. It trades about 0.15 of its potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about -0.05 per unit of risk. If you would invest  3,621  in Avista on December 29, 2024 and sell it today you would earn a total of  480.00  from holding Avista or generate 13.26% return on investment over 90 days.

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

Avista  vs.  Brookfield Infrastructure Part

Avista

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avista are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Avista sustained solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Brookfield Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Avista and Brookfield Infrastructure

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

The idea behind Avista and Brookfield Infrastructure 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 Global Correlations module to find global opportunities by holding instruments from different markets.