Correlation Between Brookfield and PowerBand Solutions

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

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

Diversification Opportunities for Brookfield and PowerBand Solutions

-0.38

Correlation Coefficient

Brookfield  PowerBand Solutions

Very good diversification

The 3 months correlation between Brookfield and PowerBand is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and PowerBand Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerBand Solutions 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 PowerBand Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerBand Solutions has no effect on the direction of Brookfield i.e., Brookfield and PowerBand Solutions go up and down completely randomly.

Pair Corralation between Brookfield and PowerBand Solutions

Assuming the 90 days trading horizon Brookfield is expected to generate 22.18 times less return on investment than PowerBand Solutions. But when comparing it to its historical volatility, Brookfield is 11.33 times less risky than PowerBand Solutions. It trades about 0.11 of its potential returns per unit of risk. PowerBand Solutions is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5.50  in PowerBand Solutions on September 2, 2024 and sell it today you would earn a total of  7.50  from holding PowerBand Solutions or generate 136.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Brookfield  vs.  PowerBand Solutions

Brookfield

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 8 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

PowerBand Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PowerBand Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, PowerBand Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield and PowerBand Solutions

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

The idea behind Brookfield and PowerBand Solutions 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.