Correlation Between Brightsphere Investment and Brookfield Business

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

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

Diversification Opportunities for Brightsphere Investment and Brookfield Business

0.78

Correlation Coefficient

Brightsphere Investment  Brookfield Business

Poor diversification

The 3 months correlation between Brightsphere and Brookfield is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Brightsphere Investment Group and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and Brightsphere Investment 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 Brightsphere Investment Group are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of Brightsphere Investment i.e., Brightsphere Investment and Brookfield Business go up and down completely randomly.

Pair Corralation between Brightsphere Investment and Brookfield Business

Given the investment horizon of 90 days Brightsphere Investment Group is expected to generate 0.97 times more return on investment than Brookfield Business. However, Brightsphere Investment Group is 1.03 times less risky than Brookfield Business. It trades about 0.21 of its potential returns per unit of risk. Brookfield Business Corp is currently generating about 0.18 per unit of risk. If you would invest  2,374  in Brightsphere Investment Group on September 12, 2024 and sell it today you would earn a total of  663.00  from holding Brightsphere Investment Group or generate 27.93% return on investment over 90 days.

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

Brightsphere Investment Group  vs.  Brookfield Business Corp

Brightsphere Investment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Business Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Brookfield Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brightsphere Investment and Brookfield Business

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

The idea behind Brightsphere Investment Group and Brookfield Business Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.