Correlation Between Brookfield Business and Investor

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

Diversification Opportunities for Brookfield Business and Investor

0.35

Correlation Coefficient

Brookfield Business  Investor

Weak diversification

The 3 months correlation between Brookfield and Investor is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser 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 Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of Brookfield Business i.e., Brookfield Business and Investor go up and down completely randomly.

Pair Corralation between Brookfield Business and Investor

Given the investment horizon of 90 days Brookfield Business is expected to generate 1.16 times less return on investment than Investor. In addition to that, Brookfield Business is 1.21 times more volatile than Investor AB ser. It trades about 0.19 of its total potential returns per unit of risk. Investor AB ser is currently generating about 0.26 per unit of volatility. If you would invest  2,605  in Investor AB ser on December 2, 2024 and sell it today you would earn a total of  401.00  from holding Investor AB ser or generate 15.39% return on investment over 90 days.

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

Brookfield Business Corp  vs.  Investor AB ser

Brookfield Business Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Business is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Investor AB ser

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investor AB ser are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Investor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Business and Investor

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

The idea behind Brookfield Business Corp and Investor AB ser 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.