Correlation Between Brookfield and Kesselrun Resources

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

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

Diversification Opportunities for Brookfield and Kesselrun Resources

0.04

Correlation Coefficient

Brookfield  Kesselrun Resources

Significant diversification

The 3 months correlation between Brookfield and Kesselrun is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Kesselrun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesselrun Resources 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 Kesselrun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesselrun Resources has no effect on the direction of Brookfield i.e., Brookfield and Kesselrun Resources go up and down completely randomly.

Pair Corralation between Brookfield and Kesselrun Resources

Assuming the 90 days trading horizon Brookfield is expected to under-perform the Kesselrun Resources. But the preferred stock apears to be less risky and, when comparing its historical volatility, Brookfield is 18.52 times less risky than Kesselrun Resources. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Kesselrun Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Kesselrun Resources on December 26, 2024 and sell it today you would earn a total of  0.00  from holding Kesselrun Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Brookfield  vs.  Kesselrun Resources

Brookfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Kesselrun Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kesselrun Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kesselrun Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield and Kesselrun Resources

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

The idea behind Brookfield and Kesselrun Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..