Correlation Between Brookfield and Mountain Province

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

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

Diversification Opportunities for Brookfield and Mountain Province

0.29

Correlation Coefficient

Brookfield  Mountain Province

Modest diversification

The 3 months correlation between Brookfield and Mountain is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Mountain Province Diamonds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mountain Province 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 Mountain Province. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mountain Province has no effect on the direction of Brookfield i.e., Brookfield and Mountain Province go up and down completely randomly.

Pair Corralation between Brookfield and Mountain Province

Assuming the 90 days horizon Brookfield is expected to generate 0.19 times more return on investment than Mountain Province. However, Brookfield is 5.4 times less risky than Mountain Province. It trades about -0.02 of its potential returns per unit of risk. Mountain Province Diamonds is currently generating about -0.03 per unit of risk. If you would invest  8,243  in Brookfield on December 25, 2024 and sell it today you would lose (313.00) from holding Brookfield or give up 3.8% of portfolio value over 90 days.

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

Brookfield  vs.  Mountain Province Diamonds

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.

Mountain Province

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mountain Province Diamonds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brookfield and Mountain Province

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

The idea behind Brookfield and Mountain Province Diamonds 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.