Correlation Between BlackRock Capital and Brookfield Business

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

By analyzing existing cross correlation between BlackRock Capital Allocation and Brookfield Business Corp, you can compare the effects of market volatilities on BlackRock Capital and Brookfield Business 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 BlackRock Capital with a short position of Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock Capital and Brookfield Business.

Diversification Opportunities for BlackRock Capital and Brookfield Business

0.81

Correlation Coefficient

BlackRock Capital  Brookfield Business

Very poor diversification

The 3 months correlation between BlackRock and Brookfield is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Capital Allocation and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and BlackRock Capital 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 BlackRock Capital Allocation are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of BlackRock Capital i.e., BlackRock Capital and Brookfield Business go up and down completely randomly.

Pair Corralation between BlackRock Capital and Brookfield Business

Given the investment horizon of 90 days BlackRock Capital is expected to generate 5.29 times less return on investment than Brookfield Business. But when comparing it to its historical volatility, BlackRock Capital Allocation is 3.82 times less risky than Brookfield Business. It trades about 0.12 of its potential returns per unit of risk. Brookfield Business Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,232  in Brookfield Business Corp on September 3, 2024 and sell it today you would earn a total of  527.00  from holding Brookfield Business Corp or generate 23.61% return on investment over 90 days.

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

BlackRock Capital Allocation  vs.  Brookfield Business Corp

BlackRock Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Capital Allocation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Brookfield Business Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 12 (%) 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.

Pair Trading with BlackRock Capital and Brookfield Business

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

The idea behind BlackRock Capital Allocation and Brookfield Business Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.