Correlation Between Brookfield Asset and Magellan Aerospace

Can any of the company-specific risk be diversified away by investing in both Brookfield Asset and Magellan Aerospace 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 Magellan Aerospace 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 Magellan Aerospace, you can compare the effects of market volatilities on Brookfield Asset and Magellan Aerospace 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 Magellan Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Asset and Magellan Aerospace.

Diversification Opportunities for Brookfield Asset and Magellan Aerospace

-0.3

Correlation Coefficient

Brookfield Asset  Magellan Aerospace

Very good diversification

The 3 months correlation between Brookfield and Magellan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and Magellan Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Aerospace 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 Magellan Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Aerospace has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and Magellan Aerospace go up and down completely randomly.

Pair Corralation between Brookfield Asset and Magellan Aerospace

Assuming the 90 days trading horizon Brookfield Asset Management is expected to generate 0.35 times more return on investment than Magellan Aerospace. However, Brookfield Asset Management is 2.88 times less risky than Magellan Aerospace. It trades about 0.24 of its potential returns per unit of risk. Magellan Aerospace is currently generating about -0.01 per unit of risk. If you would invest  1,134  in Brookfield Asset Management on October 26, 2024 and sell it today you would earn a total of  122.00  from holding Brookfield Asset Management or generate 10.76% return on investment over 90 days.

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

Brookfield Asset Management  vs.  Magellan Aerospace

Brookfield Asset Man

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Brookfield Asset may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Magellan Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magellan Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Magellan Aerospace is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Asset and Magellan Aerospace

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

The idea behind Brookfield Asset Management and Magellan Aerospace 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.