Correlation Between Brookfield Corp and Lument Finance

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

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

Diversification Opportunities for Brookfield Corp and Lument Finance

0.11

Correlation Coefficient

Brookfield Corp  Lument Finance

Average diversification

The 3 months correlation between Brookfield and Lument is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Corp and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust 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 Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Brookfield Corp i.e., Brookfield Corp and Lument Finance go up and down completely randomly.

Pair Corralation between Brookfield Corp and Lument Finance

Allowing for the 90-day total investment horizon Brookfield Corp is expected to under-perform the Lument Finance. In addition to that, Brookfield Corp is 1.03 times more volatile than Lument Finance Trust. It trades about -0.05 of its total potential returns per unit of risk. Lument Finance Trust is currently generating about 0.14 per unit of volatility. If you would invest  244.00  in Lument Finance Trust on December 1, 2024 and sell it today you would earn a total of  35.00  from holding Lument Finance Trust or generate 14.34% return on investment over 90 days.

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

Brookfield Corp  vs.  Lument Finance Trust

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.

Lument Finance Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Lument Finance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Corp and Lument Finance

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

The idea behind Brookfield Corp and Lument Finance Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.