Correlation Between Leons Furniture and Brookfield Renewable

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

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

Diversification Opportunities for Leons Furniture and Brookfield Renewable

-0.73

Correlation Coefficient

Leons Furniture  Brookfield Renewable

Pay attention - limited upside

The 3 months correlation between Leons and Brookfield is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Brookfield Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable has no effect on the direction of Leons Furniture i.e., Leons Furniture and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Leons Furniture and Brookfield Renewable

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Brookfield Renewable. In addition to that, Leons Furniture is 2.59 times more volatile than Brookfield Renewable Energy. It trades about -0.07 of its total potential returns per unit of risk. Brookfield Renewable Energy is currently generating about 0.12 per unit of volatility. If you would invest  2,391  in Brookfield Renewable Energy on September 3, 2024 and sell it today you would earn a total of  102.00  from holding Brookfield Renewable Energy or generate 4.27% return on investment over 90 days.

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

Leons Furniture Limited  vs.  Brookfield Renewable Energy

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Brookfield Renewable

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leons Furniture and Brookfield Renewable

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

The idea behind Leons Furniture Limited and Brookfield Renewable Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.