Correlation Between Brookfield Infrastructure and RWE AG

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

Diversification Opportunities for Brookfield Infrastructure and RWE AG

0.75

Correlation Coefficient

Brookfield Infrastructure  RWE AG

Poor diversification

The 3 months correlation between Brookfield and RWE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG PK has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and RWE AG go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and RWE AG

Considering the 90-day investment horizon Brookfield Infrastructure Partners is expected to under-perform the RWE AG. In addition to that, Brookfield Infrastructure is 1.12 times more volatile than RWE AG PK. It trades about -0.06 of its total potential returns per unit of risk. RWE AG PK is currently generating about -0.05 per unit of volatility. If you would invest  3,380  in RWE AG PK on November 29, 2024 and sell it today you would lose (183.00) from holding RWE AG PK or give up 5.41% of portfolio value over 90 days.

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

Brookfield Infrastructure Part  vs.  RWE AG PK

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. Even with latest unsteady performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RWE AG PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days RWE AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, RWE AG 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 RWE AG

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

The idea behind Brookfield Infrastructure Partners and RWE AG PK 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.