Correlation Between Iberdrola and Brookfield Infrastructure

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

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

Diversification Opportunities for Iberdrola and Brookfield Infrastructure

0.41

Correlation Coefficient

Iberdrola  Brookfield Infrastructure

Very weak diversification

The 3 months correlation between Iberdrola and Brookfield is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and Iberdrola 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 Iberdrola SA are associated (or correlated) with Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Iberdrola i.e., Iberdrola and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Iberdrola and Brookfield Infrastructure

Assuming the 90 days horizon Iberdrola SA is expected to generate 0.68 times more return on investment than Brookfield Infrastructure. However, Iberdrola SA is 1.47 times less risky than Brookfield Infrastructure. It trades about 0.08 of its potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about 0.04 per unit of risk. If you would invest  1,388  in Iberdrola SA on November 20, 2024 and sell it today you would earn a total of  25.00  from holding Iberdrola SA or generate 1.8% return on investment over 90 days.

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

Iberdrola SA  vs.  Brookfield Infrastructure Part

Iberdrola SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Iberdrola SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Iberdrola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Brookfield Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Iberdrola and Brookfield Infrastructure

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

The idea behind Iberdrola SA and Brookfield Infrastructure Partners 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.