Correlation Between Brookfield Asset and Netcapital

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

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

Diversification Opportunities for Brookfield Asset and Netcapital

0.34

Correlation Coefficient

Brookfield Asset  Netcapital

Weak diversification

The 3 months correlation between Brookfield and Netcapital is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital and Brookfield Asset 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 Asset Management are associated (or correlated) with Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and Netcapital go up and down completely randomly.

Pair Corralation between Brookfield Asset and Netcapital

Considering the 90-day investment horizon Brookfield Asset is expected to generate 5.31 times less return on investment than Netcapital. But when comparing it to its historical volatility, Brookfield Asset Management is 1.63 times less risky than Netcapital. It trades about 0.13 of its potential returns per unit of risk. Netcapital is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Netcapital on November 19, 2024 and sell it today you would earn a total of  57.00  from holding Netcapital or generate 30.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Brookfield Asset Management  vs.  Netcapital

Brookfield Asset Man

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Asset may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Netcapital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Asset and Netcapital

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

The idea behind Brookfield Asset Management and Netcapital 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.