Correlation Between Brookfield Office and Air Canada

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

Diversification Opportunities for Brookfield Office and Air Canada

0.7

Correlation Coefficient

Brookfield Office  Air Canada

Poor diversification

The 3 months correlation between Brookfield and Air is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada 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 Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Brookfield Office i.e., Brookfield Office and Air Canada go up and down completely randomly.

Pair Corralation between Brookfield Office and Air Canada

Assuming the 90 days trading horizon Brookfield Office is expected to generate 7.37 times less return on investment than Air Canada. But when comparing it to its historical volatility, Brookfield Office Properties is 2.44 times less risky than Air Canada. It trades about 0.07 of its potential returns per unit of risk. Air Canada is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,613  in Air Canada on October 1, 2024 and sell it today you would earn a total of  630.00  from holding Air Canada or generate 39.06% 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.  Air Canada

Brookfield Office

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air Canada

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Canada are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Air Canada displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Office and Air Canada

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

The idea behind Brookfield Office Properties and Air Canada 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.