Correlation Between Brookfield Office and Western Copper

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

Diversification Opportunities for Brookfield Office and Western Copper

-0.64

Correlation Coefficient

Brookfield Office  Western Copper

Excellent diversification

The 3 months correlation between Brookfield and Western is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Brookfield Office i.e., Brookfield Office and Western Copper go up and down completely randomly.

Pair Corralation between Brookfield Office and Western Copper

Assuming the 90 days trading horizon Brookfield Office Properties is expected to generate 0.6 times more return on investment than Western Copper. However, Brookfield Office Properties is 1.66 times less risky than Western Copper. It trades about 0.01 of its potential returns per unit of risk. Western Copper and is currently generating about -0.03 per unit of risk. If you would invest  1,646  in Brookfield Office Properties on September 25, 2024 and sell it today you would earn a total of  40.00  from holding Brookfield Office Properties or generate 2.43% return on investment over 90 days.

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

Brookfield Office Properties  vs.  Western Copper and

Brookfield Office

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Office may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brookfield Office and Western Copper

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

The idea behind Brookfield Office Properties and Western Copper and 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.