Correlation Between Brookfield and Lode Gold

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

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

Diversification Opportunities for Brookfield and Lode Gold

0.18

Correlation Coefficient

Brookfield  Lode Gold

Average diversification

The 3 months correlation between Brookfield and Lode is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Lode Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lode Gold 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 Lode Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lode Gold Resources has no effect on the direction of Brookfield i.e., Brookfield and Lode Gold go up and down completely randomly.

Pair Corralation between Brookfield and Lode Gold

Assuming the 90 days horizon Brookfield is expected to under-perform the Lode Gold. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield is 3.71 times less risky than Lode Gold. The stock trades about -0.04 of its potential returns per unit of risk. The Lode Gold Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Lode Gold Resources on December 21, 2024 and sell it today you would earn a total of  7.00  from holding Lode Gold Resources or generate 43.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Brookfield  vs.  Lode Gold 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. In spite of very healthy basic indicators, Brookfield is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lode Gold Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lode Gold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lode Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield and Lode Gold

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

The idea behind Brookfield and Lode Gold 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.