Correlation Between Bradespar and Brookfield

Can any of the company-specific risk be diversified away by investing in both Bradespar and Brookfield 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 Bradespar and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bradespar SA and Brookfield, you can compare the effects of market volatilities on Bradespar and Brookfield 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 Bradespar with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bradespar and Brookfield.

Diversification Opportunities for Bradespar and Brookfield

-0.42

Correlation Coefficient

Bradespar  Brookfield

Very good diversification

The 3 months correlation between Bradespar and Brookfield is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bradespar SA and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Bradespar 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 Bradespar SA are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Bradespar i.e., Bradespar and Brookfield go up and down completely randomly.

Pair Corralation between Bradespar and Brookfield

Assuming the 90 days trading horizon Bradespar SA is expected to under-perform the Brookfield. But the stock apears to be less risky and, when comparing its historical volatility, Bradespar SA is 1.21 times less risky than Brookfield. The stock trades about -0.06 of its potential returns per unit of risk. The Brookfield is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,669  in Brookfield on October 23, 2024 and sell it today you would earn a total of  1,156  from holding Brookfield or generate 15.07% return on investment over 90 days.

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

Bradespar SA  vs.  Brookfield

Bradespar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bradespar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bradespar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Brookfield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bradespar and Brookfield

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

The idea behind Bradespar SA and Brookfield 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.