Correlation Between Brookfield Investments and Western Investment

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

By analyzing existing cross correlation between Brookfield Investments and Western Investment, you can compare the effects of market volatilities on Brookfield Investments and Western Investment 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 Western Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Investments and Western Investment.

Diversification Opportunities for Brookfield Investments and Western Investment

-0.03

Correlation Coefficient

Brookfield Investments  Western Investment

Good diversification

The 3 months correlation between Brookfield and Western is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Investments and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of Brookfield Investments i.e., Brookfield Investments and Western Investment go up and down completely randomly.

Pair Corralation between Brookfield Investments and Western Investment

Assuming the 90 days trading horizon Brookfield Investments is expected to generate 7.7 times less return on investment than Western Investment. But when comparing it to its historical volatility, Brookfield Investments is 10.17 times less risky than Western Investment. It trades about 0.05 of its potential returns per unit of risk. Western Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Western Investment on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Western Investment or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.13%
Values	Daily Returns

Brookfield Investments  vs.  Western Investment

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Western Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Western Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookfield Investments and Western Investment

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

The idea behind Brookfield Investments and Western Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.