Correlation Between Dfa International and Brookfield Global

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

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

Diversification Opportunities for Dfa International and Brookfield Global

0.85

Correlation Coefficient

Dfa International  Brookfield Global

Very poor diversification

The 3 months correlation between Dfa and Brookfield is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dfa International Real and Brookfield Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Global Listed and Dfa International 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 Dfa International Real are associated (or correlated) with Brookfield Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Global Listed has no effect on the direction of Dfa International i.e., Dfa International and Brookfield Global go up and down completely randomly.

Pair Corralation between Dfa International and Brookfield Global

Assuming the 90 days horizon Dfa International Real is expected to under-perform the Brookfield Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dfa International Real is 1.17 times less risky than Brookfield Global. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Brookfield Global Listed is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,178  in Brookfield Global Listed on December 2, 2024 and sell it today you would lose (31.00) from holding Brookfield Global Listed or give up 2.63% of portfolio value over 90 days.

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

Dfa International Real  vs.  Brookfield Global Listed

Dfa International Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dfa International Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Dfa International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Global Listed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Global Listed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brookfield Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dfa International and Brookfield Global

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

The idea behind Dfa International Real and Brookfield Global Listed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.