Correlation Between Brookfield Infrastructure and Vanguard Utilities

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

Diversification Opportunities for Brookfield Infrastructure and Vanguard Utilities

0.17

Correlation Coefficient

Brookfield Infrastructure  Vanguard Utilities

Average diversification

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

Pair Corralation between Brookfield Infrastructure and Vanguard Utilities

Considering the 90-day investment horizon Brookfield Infrastructure Partners is expected to under-perform the Vanguard Utilities. In addition to that, Brookfield Infrastructure is 1.75 times more volatile than Vanguard Utilities Index. It trades about -0.05 of its total potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.05 per unit of volatility. If you would invest  8,211  in Vanguard Utilities Index on December 30, 2024 and sell it today you would earn a total of  269.00  from holding Vanguard Utilities Index or generate 3.28% 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.  Vanguard Utilities Index

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 relatively invariable forward indicators, Brookfield Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard Utilities Index

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Utilities Index are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Utilities 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 Vanguard Utilities

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

The idea behind Brookfield Infrastructure Partners and Vanguard Utilities Index 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.