Correlation Between Brookfield Asset and Alaska Energy

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

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

Diversification Opportunities for Brookfield Asset and Alaska Energy

0.36

Correlation Coefficient

Brookfield Asset  Alaska Energy

Weak diversification

The 3 months correlation between Brookfield and Alaska is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and Alaska Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Energy Metals and Brookfield Asset 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 Asset Management are associated (or correlated) with Alaska Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Energy Metals has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and Alaska Energy go up and down completely randomly.

Pair Corralation between Brookfield Asset and Alaska Energy

Assuming the 90 days trading horizon Brookfield Asset Management is expected to generate 0.1 times more return on investment than Alaska Energy. However, Brookfield Asset Management is 9.65 times less risky than Alaska Energy. It trades about 0.13 of its potential returns per unit of risk. Alaska Energy Metals is currently generating about -0.05 per unit of risk. If you would invest  1,127  in Brookfield Asset Management on December 4, 2024 and sell it today you would earn a total of  118.00  from holding Brookfield Asset Management or generate 10.47% return on investment over 90 days.

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

Brookfield Asset Management  vs.  Alaska Energy Metals

Brookfield Asset Man

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Brookfield Asset is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Alaska Energy Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alaska Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Alaska Energy is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Brookfield Asset and Alaska Energy

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

The idea behind Brookfield Asset Management and Alaska Energy Metals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.