Correlation Between Brookfield Corp and IB Acquisition

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

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

Diversification Opportunities for Brookfield Corp and IB Acquisition

-0.51

Correlation Coefficient

Brookfield Corp  IB Acquisition

Excellent diversification

The 3 months correlation between Brookfield and IBAC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Corp and IB Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IB Acquisition Corp and Brookfield Corp 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 Corp are associated (or correlated) with IB Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IB Acquisition Corp has no effect on the direction of Brookfield Corp i.e., Brookfield Corp and IB Acquisition go up and down completely randomly.

Pair Corralation between Brookfield Corp and IB Acquisition

Allowing for the 90-day total investment horizon Brookfield Corp is expected to under-perform the IB Acquisition. In addition to that, Brookfield Corp is 13.32 times more volatile than IB Acquisition Corp. It trades about -0.02 of its total potential returns per unit of risk. IB Acquisition Corp is currently generating about 0.18 per unit of volatility. If you would invest  1,011  in IB Acquisition Corp on December 26, 2024 and sell it today you would earn a total of  17.00  from holding IB Acquisition Corp or generate 1.68% return on investment over 90 days.

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

Brookfield Corp  vs.  IB Acquisition Corp

Brookfield Corp

Risk-Adjusted Performance

Very Weak

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

IB Acquisition Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IB Acquisition is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brookfield Corp and IB Acquisition

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

The idea behind Brookfield Corp and IB Acquisition Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.