Correlation Between Brookfield Investments and Air Canada

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

Diversification Opportunities for Brookfield Investments and Air Canada

-0.33

Correlation Coefficient

Brookfield Investments  Air Canada

Very good diversification

The 3 months correlation between Brookfield and Air is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Investments and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada and Brookfield Investments 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 Investments 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 Investments i.e., Brookfield Investments and Air Canada go up and down completely randomly.

Pair Corralation between Brookfield Investments and Air Canada

Assuming the 90 days trading horizon Brookfield Investments is expected to generate 0.42 times more return on investment than Air Canada. However, Brookfield Investments is 2.36 times less risky than Air Canada. It trades about -0.01 of its potential returns per unit of risk. Air Canada is currently generating about -0.35 per unit of risk. If you would invest  2,513  in Brookfield Investments on December 4, 2024 and sell it today you would lose (12.00) from holding Brookfield Investments or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.82%
Values	Daily Returns

Brookfield Investments  vs.  Air Canada

Brookfield Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Air Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Canada 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Brookfield Investments and Air Canada

The main advantage of trading using opposite Brookfield Investments and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Investments 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 Investments 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.