Correlation Between Brookfield Infrastructure and Good Vibrations

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

Diversification Opportunities for Brookfield Infrastructure and Good Vibrations

0.17

Correlation Coefficient

Brookfield Infrastructure  Good Vibrations

Average diversification

The 3 months correlation between Brookfield and Good is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Good Vibrations Shoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Vibrations Shoes 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 Good Vibrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Vibrations Shoes has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Good Vibrations go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Good Vibrations

Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to under-perform the Good Vibrations. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brookfield Infrastructure Partners is 10.42 times less risky than Good Vibrations. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Good Vibrations Shoes is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Good Vibrations Shoes on December 30, 2024 and sell it today you would lose (0.01) from holding Good Vibrations Shoes or give up 2.86% of portfolio value over 90 days.

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

Brookfield Infrastructure Part  vs.  Good Vibrations Shoes

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Good Vibrations Shoes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Infrastructure and Good Vibrations

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

The idea behind Brookfield Infrastructure Partners and Good Vibrations Shoes 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.