Correlation Between Brookfield Infrastructure and Postmedia Network

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

Diversification Opportunities for Brookfield Infrastructure and Postmedia Network

0.13

Correlation Coefficient

Brookfield Infrastructure  Postmedia Network

Average diversification

The 3 months correlation between Brookfield and Postmedia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Postmedia Network go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Postmedia Network

Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 0.36 times more return on investment than Postmedia Network. However, Brookfield Infrastructure Partners is 2.82 times less risky than Postmedia Network. It trades about 0.01 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.36 per unit of risk. If you would invest  2,499  in Brookfield Infrastructure Partners on December 2, 2024 and sell it today you would earn a total of  1.00  from holding Brookfield Infrastructure Partners or generate 0.04% return on investment over 90 days.

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

Brookfield Infrastructure Part  vs.  Postmedia Network Canada

Brookfield Infrastructure

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Partners are ranked lower than 1 (%) 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.

Postmedia Network Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Postmedia Network Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Brookfield Infrastructure and Postmedia Network

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

The idea behind Brookfield Infrastructure Partners and Postmedia Network Canada 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.