Correlation Between Brookfield Global and Reaves Select

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

By analyzing existing cross correlation between Brookfield Global Listed and Reaves Select Research, you can compare the effects of market volatilities on Brookfield Global and Reaves Select 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 Global with a short position of Reaves Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Global and Reaves Select.

Diversification Opportunities for Brookfield Global and Reaves Select

0.79

Correlation Coefficient

Brookfield Global  Reaves Select

Poor diversification

The 3 months correlation between Brookfield and Reaves is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Global Listed and Reaves Select Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reaves Select Research and Brookfield Global 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 Global Listed are associated (or correlated) with Reaves Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reaves Select Research has no effect on the direction of Brookfield Global i.e., Brookfield Global and Reaves Select go up and down completely randomly.

Pair Corralation between Brookfield Global and Reaves Select

Assuming the 90 days horizon Brookfield Global is expected to generate 1.71 times less return on investment than Reaves Select. But when comparing it to its historical volatility, Brookfield Global Listed is 1.16 times less risky than Reaves Select. It trades about 0.04 of its potential returns per unit of risk. Reaves Select Research is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  807.00  in Reaves Select Research on December 2, 2024 and sell it today you would earn a total of  244.00  from holding Reaves Select Research or generate 30.24% return on investment over 90 days.

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

Brookfield Global Listed  vs.  Reaves Select Research

Brookfield Global Listed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Global Listed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brookfield Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Reaves Select Research

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reaves Select Research has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Reaves Select 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 Global and Reaves Select

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

The idea behind Brookfield Global Listed and Reaves Select Research 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.