Correlation Between Brookfield Business and 3i Group

Can any of the company-specific risk be diversified away by investing in both Brookfield Business and 3i Group 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 3i Group 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 3i Group PLC, you can compare the effects of market volatilities on Brookfield Business and 3i Group 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 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and 3i Group.

Diversification Opportunities for Brookfield Business and 3i Group

0.43

Correlation Coefficient

Brookfield Business  3i Group

Very weak diversification

The 3 months correlation between Brookfield and TGOPY is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and 3i Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group PLC 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 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group PLC has no effect on the direction of Brookfield Business i.e., Brookfield Business and 3i Group go up and down completely randomly.

Pair Corralation between Brookfield Business and 3i Group

Given the investment horizon of 90 days Brookfield Business Corp is expected to under-perform the 3i Group. In addition to that, Brookfield Business is 1.46 times more volatile than 3i Group PLC. It trades about 0.0 of its total potential returns per unit of risk. 3i Group PLC is currently generating about 0.06 per unit of volatility. If you would invest  2,410  in 3i Group PLC on December 3, 2024 and sell it today you would earn a total of  102.00  from holding 3i Group PLC or generate 4.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Brookfield Business Corp  vs.  3i Group PLC

Brookfield Business Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Brookfield Business Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

3i Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, 3i Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Business and 3i Group

The main advantage of trading using opposite Brookfield Business and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.

The idea behind Brookfield Business Corp and 3i Group PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.