Correlation Between Brookfield Infrastructure and Duke Energy

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

Diversification Opportunities for Brookfield Infrastructure and Duke Energy

0.26

Correlation Coefficient

Brookfield Infrastructure  Duke Energy

Modest diversification

The 3 months correlation between Brookfield and Duke is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Duke Energy go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Duke Energy

Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 3.47 times more return on investment than Duke Energy. However, Brookfield Infrastructure is 3.47 times more volatile than Duke Energy. It trades about 0.11 of its potential returns per unit of risk. Duke Energy is currently generating about 0.03 per unit of risk. If you would invest  1,730  in Brookfield Infrastructure Partners on September 3, 2024 and sell it today you would earn a total of  160.00  from holding Brookfield Infrastructure Partners or generate 9.25% return on investment over 90 days.

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

Brookfield Infrastructure Part  vs.  Duke Energy

Brookfield Infrastructure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Infrastructure may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Duke Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Duke Energy 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 Infrastructure and Duke Energy

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

The idea behind Brookfield Infrastructure Partners and Duke Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.