Correlation Between Magna Mining and Brookfield

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

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

Diversification Opportunities for Magna Mining and Brookfield

0.31

Correlation Coefficient

Magna Mining  Brookfield

Weak diversification

The 3 months correlation between Magna and Brookfield is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Magna Mining and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Magna Mining 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 Magna Mining 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 Magna Mining i.e., Magna Mining and Brookfield go up and down completely randomly.

Pair Corralation between Magna Mining and Brookfield

Assuming the 90 days trading horizon Magna Mining is expected to generate 5.43 times more return on investment than Brookfield. However, Magna Mining is 5.43 times more volatile than Brookfield. It trades about 0.17 of its potential returns per unit of risk. Brookfield is currently generating about 0.22 per unit of risk. If you would invest  112.00  in Magna Mining on October 10, 2024 and sell it today you would earn a total of  48.00  from holding Magna Mining or generate 42.86% return on investment over 90 days.

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

Magna Mining  vs.  Brookfield

Magna Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Magna Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Magna Mining and Brookfield

The main advantage of trading using opposite Magna Mining and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna Mining 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 Magna Mining 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.