Correlation Between Brookfield Business and Erdene Resource

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

By analyzing existing cross correlation between Brookfield Business Corp and Erdene Resource Development, you can compare the effects of market volatilities on Brookfield Business and Erdene Resource 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 Erdene Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Erdene Resource.

Diversification Opportunities for Brookfield Business and Erdene Resource

0.7

Correlation Coefficient

Brookfield Business  Erdene Resource

Poor diversification

The 3 months correlation between Brookfield and Erdene is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve 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 Corp are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of Brookfield Business i.e., Brookfield Business and Erdene Resource go up and down completely randomly.

Pair Corralation between Brookfield Business and Erdene Resource

Assuming the 90 days trading horizon Brookfield Business is expected to generate 2.8 times less return on investment than Erdene Resource. But when comparing it to its historical volatility, Brookfield Business Corp is 1.68 times less risky than Erdene Resource. It trades about 0.13 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Erdene Resource Development on December 24, 2024 and sell it today you would earn a total of  25.00  from holding Erdene Resource Development or generate 46.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Brookfield Business Corp  vs.  Erdene Resource Development

Brookfield Business Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Brookfield Business displayed solid returns over the last few months and may actually be approaching a breakup point.

Erdene Resource Deve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Business and Erdene Resource

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

The idea behind Brookfield Business Corp and Erdene Resource Development 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.

Check out your portfolio center.

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.