Correlation Between Brookfield Business and Sprott Focus

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

Diversification Opportunities for Brookfield Business and Sprott Focus

-0.02

Correlation Coefficient

Brookfield Business  Sprott Focus

Good diversification

The 3 months correlation between Brookfield and Sprott is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Brookfield Business i.e., Brookfield Business and Sprott Focus go up and down completely randomly.

Pair Corralation between Brookfield Business and Sprott Focus

Given the investment horizon of 90 days Brookfield Business Corp is expected to generate 2.28 times more return on investment than Sprott Focus. However, Brookfield Business is 2.28 times more volatile than Sprott Focus Trust. It trades about 0.14 of its potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.07 per unit of risk. If you would invest  2,314  in Brookfield Business Corp on December 30, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brookfield Business Corp  vs.  Sprott Focus Trust

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.

Sprott Focus Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brookfield Business and Sprott Focus

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

The idea behind Brookfield Business Corp and Sprott Focus Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.