Correlation Between Brookfield and Invesco

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

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

Diversification Opportunities for Brookfield and Invesco

0.9

Correlation Coefficient

Brookfield  Invesco

Almost no diversification

The 3 months correlation between Brookfield and Invesco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Invesco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco and Brookfield 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 Brookfield are associated (or correlated) with Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco has no effect on the direction of Brookfield i.e., Brookfield and Invesco go up and down completely randomly.

Pair Corralation between Brookfield and Invesco

Assuming the 90 days trading horizon Brookfield is expected to under-perform the Invesco. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield is 1.85 times less risky than Invesco. The stock trades about -0.05 of its potential returns per unit of risk. The Invesco is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,750  in Invesco on October 6, 2024 and sell it today you would earn a total of  173.00  from holding Invesco or generate 1.61% return on investment over 90 days.

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

Brookfield  vs.  Invesco

Brookfield

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Invesco

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invesco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield and Invesco

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

The idea behind Brookfield and Invesco 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.