Correlation Between Brookfield Office and US Financial

Can any of the company-specific risk be diversified away by investing in both Brookfield Office and US Financial 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 US Financial 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 US Financial 15, you can compare the effects of market volatilities on Brookfield Office and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Office and US Financial.

Diversification Opportunities for Brookfield Office and US Financial

0.84

Correlation Coefficient

Brookfield Office  US Financial

Very poor diversification

The 3 months correlation between Brookfield and FTU-PB is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Brookfield Office i.e., Brookfield Office and US Financial go up and down completely randomly.

Pair Corralation between Brookfield Office and US Financial

Assuming the 90 days trading horizon Brookfield Office Properties is expected to generate 0.62 times more return on investment than US Financial. However, Brookfield Office Properties is 1.62 times less risky than US Financial. It trades about 0.29 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.11 per unit of risk. If you would invest  1,490  in Brookfield Office Properties on September 22, 2024 and sell it today you would earn a total of  640.00  from holding Brookfield Office Properties or generate 42.95% return on investment over 90 days.

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

Brookfield Office Properties  vs.  US Financial 15

Brookfield Office

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 22 (%) 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.

US Financial 15

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Office and US Financial

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

The idea behind Brookfield Office Properties and US Financial 15 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.