Correlation Between Brookfield Office and Exxon

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

Diversification Opportunities for Brookfield Office and Exxon

-0.35

Correlation Coefficient

Brookfield Office  Exxon

Very good diversification

The 3 months correlation between Brookfield and Exxon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of Brookfield Office i.e., Brookfield Office and Exxon go up and down completely randomly.

Pair Corralation between Brookfield Office and Exxon

Assuming the 90 days trading horizon Brookfield Office Properties is expected to generate 0.75 times more return on investment than Exxon. However, Brookfield Office Properties is 1.34 times less risky than Exxon. It trades about 0.11 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about -0.03 per unit of risk. If you would invest  1,431  in Brookfield Office Properties on September 27, 2024 and sell it today you would earn a total of  209.00  from holding Brookfield Office Properties or generate 14.61% return on investment over 90 days.

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

Brookfield Office Properties  vs.  EXXON MOBIL CDR

Brookfield Office

Risk-Adjusted Performance

5 of 100

OK

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.

EXXON MOBIL CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Brookfield Office and Exxon

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

The idea behind Brookfield Office Properties and EXXON MOBIL CDR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.