Correlation Between Brookfield Office and Canaf Investments

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

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

Diversification Opportunities for Brookfield Office and Canaf Investments

0.6

Correlation Coefficient

Brookfield Office  Canaf Investments

Poor diversification

The 3 months correlation between Brookfield and Canaf is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and Canaf Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canaf Investments and Brookfield Office 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 Office Properties are associated (or correlated) with Canaf Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canaf Investments has no effect on the direction of Brookfield Office i.e., Brookfield Office and Canaf Investments go up and down completely randomly.

Pair Corralation between Brookfield Office and Canaf Investments

Assuming the 90 days trading horizon Brookfield Office Properties is expected to generate 0.31 times more return on investment than Canaf Investments. However, Brookfield Office Properties is 3.2 times less risky than Canaf Investments. It trades about 0.22 of its potential returns per unit of risk. Canaf Investments is currently generating about -0.07 per unit of risk. If you would invest  2,000  in Brookfield Office Properties on September 4, 2024 and sell it today you would earn a total of  108.00  from holding Brookfield Office Properties or generate 5.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Brookfield Office Properties  vs.  Canaf Investments

Brookfield Office

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Brookfield Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Canaf Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canaf Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Canaf Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookfield Office and Canaf Investments

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

The idea behind Brookfield Office Properties and Canaf Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.