Correlation Between Brookfield Business and MFS Investment

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

Diversification Opportunities for Brookfield Business and MFS Investment

0.53

Correlation Coefficient

Brookfield Business  MFS Investment

Very weak diversification

The 3 months correlation between Brookfield and MFS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade 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 MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of Brookfield Business i.e., Brookfield Business and MFS Investment go up and down completely randomly.

Pair Corralation between Brookfield Business and MFS Investment

Given the investment horizon of 90 days Brookfield Business Corp is expected to generate 3.85 times more return on investment than MFS Investment. However, Brookfield Business is 3.85 times more volatile than MFS Investment Grade. It trades about 0.14 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.01 per unit of risk. If you would invest  2,314  in Brookfield Business Corp on December 29, 2024 and sell it today you would earn a total of  393.00  from holding Brookfield Business Corp or generate 16.98% return on investment over 90 days.

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

Brookfield Business Corp  vs.  MFS Investment Grade

Brookfield Business Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Brookfield Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

MFS Investment Grade

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFS Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Brookfield Business and MFS Investment

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

The idea behind Brookfield Business Corp and MFS Investment Grade 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.