Correlation Between Brookfield Infrastructure and Wesfarmers

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

Diversification Opportunities for Brookfield Infrastructure and Wesfarmers

0.0

Correlation Coefficient

Brookfield Infrastructure  Wesfarmers

Pay attention - limited upside

The 3 months correlation between Brookfield and Wesfarmers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Wesfarmers Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers Limited 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers Limited has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Wesfarmers go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Wesfarmers

If you would invest (100.00) in Wesfarmers Limited on December 2, 2024 and sell it today you would earn a total of  100.00  from holding Wesfarmers Limited or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Brookfield Infrastructure Part  vs.  Wesfarmers Limited

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.

Wesfarmers Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wesfarmers Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Wesfarmers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brookfield Infrastructure and Wesfarmers

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

The idea behind Brookfield Infrastructure Partners and Wesfarmers Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.