Correlation Between Brookfield Office and First National

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

Diversification Opportunities for Brookfield Office and First National

0.68

Correlation Coefficient

Brookfield Office  First National

Poor diversification

The 3 months correlation between Brookfield and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Brookfield Office i.e., Brookfield Office and First National go up and down completely randomly.

Pair Corralation between Brookfield Office and First National

Assuming the 90 days trading horizon Brookfield Office is expected to generate 1.22 times less return on investment than First National. But when comparing it to its historical volatility, Brookfield Office Properties is 1.43 times less risky than First National. It trades about 0.16 of its potential returns per unit of risk. First National Financial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,479  in First National Financial on September 22, 2024 and sell it today you would earn a total of  91.00  from holding First National Financial or generate 6.15% return on investment over 90 days.

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

Brookfield Office Properties  vs.  First National Financial

Brookfield Office

Risk-Adjusted Performance

15 of 100

Good

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

First National Financial

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookfield Office and First National

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

The idea behind Brookfield Office Properties and First National Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.