Correlation Between BlackRock and Brookfield

Can any of the company-specific risk be diversified away by investing in both BlackRock and Brookfield 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 BlackRock and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BlackRock and Brookfield, you can compare the effects of market volatilities on BlackRock and Brookfield 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 BlackRock with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and Brookfield.

Diversification Opportunities for BlackRock and Brookfield

0.91

Correlation Coefficient

BlackRock  Brookfield

Almost no diversification

The 3 months correlation between BlackRock and Brookfield is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and BlackRock 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 BlackRock are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of BlackRock i.e., BlackRock and Brookfield go up and down completely randomly.

Pair Corralation between BlackRock and Brookfield

Assuming the 90 days trading horizon BlackRock is expected to generate 1.05 times less return on investment than Brookfield. In addition to that, BlackRock is 1.07 times more volatile than Brookfield. It trades about 0.2 of its total potential returns per unit of risk. Brookfield is currently generating about 0.23 per unit of volatility. If you would invest  7,249  in Brookfield on October 8, 2024 and sell it today you would earn a total of  1,608  from holding Brookfield or generate 22.18% return on investment over 90 days.

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

BlackRock  vs.  Brookfield

BlackRock

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Brookfield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock and Brookfield

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

The idea behind BlackRock and Brookfield 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .