Correlation Between Brookfield Business and Valmont Industries

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

Diversification Opportunities for Brookfield Business and Valmont Industries

0.77

Correlation Coefficient

Brookfield Business  Valmont Industries

Poor diversification

The 3 months correlation between Brookfield and Valmont is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Valmont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valmont Industries 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 Valmont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valmont Industries has no effect on the direction of Brookfield Business i.e., Brookfield Business and Valmont Industries go up and down completely randomly.

Pair Corralation between Brookfield Business and Valmont Industries

Considering the 90-day investment horizon Brookfield Business Partners is expected to generate 0.97 times more return on investment than Valmont Industries. However, Brookfield Business Partners is 1.03 times less risky than Valmont Industries. It trades about 0.24 of its potential returns per unit of risk. Valmont Industries is currently generating about 0.19 per unit of risk. If you would invest  1,998  in Brookfield Business Partners on September 1, 2024 and sell it today you would earn a total of  646.00  from holding Brookfield Business Partners or generate 32.33% return on investment over 90 days.

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

Brookfield Business Partners  vs.  Valmont Industries

Brookfield Business

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 19 (%) 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.

Valmont Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valmont Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, Valmont Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Business and Valmont Industries

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

The idea behind Brookfield Business Partners and Valmont Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.