Correlation Between Eddy Smart and Brookfield

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

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

Diversification Opportunities for Eddy Smart and Brookfield

-0.67

Correlation Coefficient

Eddy Smart  Brookfield

Excellent diversification

The 3 months correlation between Eddy and Brookfield is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eddy Smart Home and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Eddy Smart 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 Eddy Smart Home 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 Eddy Smart i.e., Eddy Smart and Brookfield go up and down completely randomly.

Pair Corralation between Eddy Smart and Brookfield

Assuming the 90 days horizon Eddy Smart is expected to generate 2.05 times less return on investment than Brookfield. In addition to that, Eddy Smart is 11.08 times more volatile than Brookfield. It trades about 0.01 of its total potential returns per unit of risk. Brookfield is currently generating about 0.19 per unit of volatility. If you would invest  2,269  in Brookfield on October 24, 2024 and sell it today you would earn a total of  182.00  from holding Brookfield or generate 8.02% return on investment over 90 days.

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

Eddy Smart Home  vs.  Brookfield

Eddy Smart Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eddy Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eddy Smart is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Brookfield

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eddy Smart and Brookfield

The main advantage of trading using opposite Eddy Smart and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eddy Smart 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 Eddy Smart Home 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.