Correlation Between Brookfield and Western Copper

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

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

Diversification Opportunities for Brookfield and Western Copper

-0.12

Correlation Coefficient

Brookfield  Western Copper

Good diversification

The 3 months correlation between Brookfield and Western is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Brookfield i.e., Brookfield and Western Copper go up and down completely randomly.

Pair Corralation between Brookfield and Western Copper

Assuming the 90 days trading horizon Brookfield is expected to generate 0.27 times more return on investment than Western Copper. However, Brookfield is 3.71 times less risky than Western Copper. It trades about 0.1 of its potential returns per unit of risk. Western Copper and is currently generating about 0.01 per unit of risk. If you would invest  2,280  in Brookfield on September 5, 2024 and sell it today you would earn a total of  96.00  from holding Brookfield or generate 4.21% return on investment over 90 days.

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

Brookfield  vs.  Western Copper and

Brookfield

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 7 (%) 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.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Western Copper 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 Western Copper

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

The idea behind Brookfield and Western Copper and 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.