Correlation Between Brookfield Infrastructure and Laurentian Bank

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

By analyzing existing cross correlation between Brookfield Infrastructure Partners and Laurentian Bank, you can compare the effects of market volatilities on Brookfield Infrastructure and Laurentian Bank 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 Infrastructure with a short position of Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Laurentian Bank.

Diversification Opportunities for Brookfield Infrastructure and Laurentian Bank

0.81

Correlation Coefficient

Brookfield Infrastructure  Laurentian Bank

Very poor diversification

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

Pair Corralation between Brookfield Infrastructure and Laurentian Bank

Assuming the 90 days trading horizon Brookfield Infrastructure is expected to generate 4.36 times less return on investment than Laurentian Bank. But when comparing it to its historical volatility, Brookfield Infrastructure Partners is 1.66 times less risky than Laurentian Bank. It trades about 0.08 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,596  in Laurentian Bank on August 31, 2024 and sell it today you would earn a total of  369.00  from holding Laurentian Bank or generate 14.21% return on investment over 90 days.

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

Brookfield Infrastructure Part  vs.  Laurentian Bank

Brookfield Infrastructure

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Laurentian Bank

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laurentian Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laurentian Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Infrastructure and Laurentian Bank

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

The idea behind Brookfield Infrastructure Partners and Laurentian Bank 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.