Correlation Between Brookfield Business and Halma Plc

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

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

Diversification Opportunities for Brookfield Business and Halma Plc

0.14

Correlation Coefficient

Brookfield Business  Halma Plc

Average diversification

The 3 months correlation between Brookfield and Halma is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc and Brookfield Business 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 Business Partners are associated (or correlated) with Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Brookfield Business i.e., Brookfield Business and Halma Plc go up and down completely randomly.

Pair Corralation between Brookfield Business and Halma Plc

Considering the 90-day investment horizon Brookfield Business Partners is expected to generate 1.02 times more return on investment than Halma Plc. However, Brookfield Business is 1.02 times more volatile than Halma plc. It trades about 0.16 of its potential returns per unit of risk. Halma plc is currently generating about 0.04 per unit of risk. If you would invest  2,056  in Brookfield Business Partners on September 12, 2024 and sell it today you would earn a total of  424.00  from holding Brookfield Business Partners or generate 20.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Brookfield Business Partners  vs.  Halma plc

Brookfield Business

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Brookfield Business unveiled solid returns over the last few months and may actually be approaching a breakup point.

Halma plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brookfield Business and Halma Plc

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

The idea behind Brookfield Business Partners and Halma plc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.