Correlation Between New Mountain and Brookfield Business

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

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

Diversification Opportunities for New Mountain and Brookfield Business

-0.29

Correlation Coefficient

New Mountain  Brookfield Business

Very good diversification

The 3 months correlation between New and Brookfield is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and New Mountain 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 New Mountain Finance are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of New Mountain i.e., New Mountain and Brookfield Business go up and down completely randomly.

Pair Corralation between New Mountain and Brookfield Business

Given the investment horizon of 90 days New Mountain Finance is expected to under-perform the Brookfield Business. But the stock apears to be less risky and, when comparing its historical volatility, New Mountain Finance is 2.36 times less risky than Brookfield Business. The stock trades about -0.01 of its potential returns per unit of risk. The Brookfield Business Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Brookfield Business Corp on September 4, 2024 and sell it today you would earn a total of  516.00  from holding Brookfield Business Corp or generate 23.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

New Mountain Finance  vs.  Brookfield Business Corp

New Mountain Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Mountain Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, New Mountain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brookfield Business Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Brookfield Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Mountain and Brookfield Business

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

The idea behind New Mountain Finance and Brookfield Business Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.