Correlation Between Brookfield Asset and State Street

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

Diversification Opportunities for Brookfield Asset and State Street

0.87

Correlation Coefficient

Brookfield Asset  State Street

Very poor diversification

The 3 months correlation between Brookfield and State is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and State Street go up and down completely randomly.

Pair Corralation between Brookfield Asset and State Street

Considering the 90-day investment horizon Brookfield Asset Management is expected to generate 1.43 times more return on investment than State Street. However, Brookfield Asset is 1.43 times more volatile than State Street Corp. It trades about -0.04 of its potential returns per unit of risk. State Street Corp is currently generating about -0.08 per unit of risk. If you would invest  5,416  in Brookfield Asset Management on December 29, 2024 and sell it today you would lose (375.00) from holding Brookfield Asset Management or give up 6.92% of portfolio value over 90 days.

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

Brookfield Asset Management  vs.  State Street Corp

Brookfield Asset Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brookfield Asset is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

State Street Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Brookfield Asset and State Street

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

The idea behind Brookfield Asset Management and State Street Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.