Correlation Between Financial and Brookfield

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

By analyzing existing cross correlation between Financial 15 Split and Brookfield, you can compare the effects of market volatilities on Financial 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 Financial with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Brookfield.

Diversification Opportunities for Financial and Brookfield

0.7

Correlation Coefficient

Financial  Brookfield

Poor diversification

The 3 months correlation between Financial and Brookfield is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Financial 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 Financial 15 Split 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 Financial i.e., Financial and Brookfield go up and down completely randomly.

Pair Corralation between Financial and Brookfield

Assuming the 90 days trading horizon Financial is expected to generate 1.37 times less return on investment than Brookfield. But when comparing it to its historical volatility, Financial 15 Split is 2.51 times less risky than Brookfield. It trades about 0.31 of its potential returns per unit of risk. Brookfield is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,299  in Brookfield on October 5, 2024 and sell it today you would earn a total of  166.00  from holding Brookfield or generate 7.22% return on investment over 90 days.

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

Financial 15 Split  vs.  Brookfield

Financial 15 Split

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Financial and Brookfield

The main advantage of trading using opposite Financial and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial 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 Financial 15 Split 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.