Correlation Between Income Financial and Brookfield Asset

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

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

Diversification Opportunities for Income Financial and Brookfield Asset

0.87

Correlation Coefficient

Income Financial  Brookfield Asset

Very poor diversification

The 3 months correlation between Income and Brookfield is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and Income 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 Income Financial Trust are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Income Financial i.e., Income Financial and Brookfield Asset go up and down completely randomly.

Pair Corralation between Income Financial and Brookfield Asset

Assuming the 90 days trading horizon Income Financial Trust is expected to under-perform the Brookfield Asset. In addition to that, Income Financial is 1.92 times more volatile than Brookfield Asset Management. It trades about -0.02 of its total potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.03 per unit of volatility. If you would invest  1,221  in Brookfield Asset Management on December 25, 2024 and sell it today you would lose (23.00) from holding Brookfield Asset Management or give up 1.88% of portfolio value over 90 days.

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

Income Financial Trust  vs.  Brookfield Asset Management

Income Financial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Financial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Income Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Asset Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Brookfield Asset is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Income Financial and Brookfield Asset

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

The idea behind Income Financial Trust and Brookfield Asset Management 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.