Correlation Between Brookfield and Guardian

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

By analyzing existing cross correlation between Brookfield and Guardian i3 Global, you can compare the effects of market volatilities on Brookfield and Guardian 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 with a short position of Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield and Guardian.

Diversification Opportunities for Brookfield and Guardian

0.63

Correlation Coefficient

Brookfield  Guardian

Poor diversification

The 3 months correlation between Brookfield and Guardian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Guardian i3 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian i3 Global and Brookfield 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 are associated (or correlated) with Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian i3 Global has no effect on the direction of Brookfield i.e., Brookfield and Guardian go up and down completely randomly.

Pair Corralation between Brookfield and Guardian

Assuming the 90 days trading horizon Brookfield is expected to generate 0.72 times more return on investment than Guardian. However, Brookfield is 1.38 times less risky than Guardian. It trades about 0.26 of its potential returns per unit of risk. Guardian i3 Global is currently generating about 0.16 per unit of risk. If you would invest  2,306  in Brookfield on September 22, 2024 and sell it today you would earn a total of  83.00  from holding Brookfield or generate 3.6% return on investment over 90 days.

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

Brookfield  vs.  Guardian i3 Global

Brookfield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Guardian i3 Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian i3 Global are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Guardian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield and Guardian

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

The idea behind Brookfield and Guardian i3 Global 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.