Correlation Between Bitcoin and Brookfield

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

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

Diversification Opportunities for Bitcoin and Brookfield

0.8

Correlation Coefficient

Bitcoin  Brookfield

Very poor diversification

The 3 months correlation between Bitcoin and Brookfield is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Bitcoin 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 Bitcoin 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 Bitcoin i.e., Bitcoin and Brookfield go up and down completely randomly.

Pair Corralation between Bitcoin and Brookfield

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.15 times more return on investment than Brookfield. However, Bitcoin is 1.15 times more volatile than Brookfield. It trades about -0.05 of its potential returns per unit of risk. Brookfield is currently generating about -0.08 per unit of risk. If you would invest  9,568,019  in Bitcoin on December 25, 2024 and sell it today you would lose (822,963) from holding Bitcoin or give up 8.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Bitcoin  vs.  Brookfield

Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Bitcoin shareholders.

Brookfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bitcoin and Brookfield

The main advantage of trading using opposite Bitcoin and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin 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 Bitcoin 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.