Correlation Between Brookfield Real and FAM

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

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

Diversification Opportunities for Brookfield Real and FAM

0.39

Correlation Coefficient

Brookfield Real  FAM

Weak diversification

The 3 months correlation between Brookfield and FAM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Real Assets and FAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAM and Brookfield Real 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 Brookfield Real Assets are associated (or correlated) with FAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAM has no effect on the direction of Brookfield Real i.e., Brookfield Real and FAM go up and down completely randomly.

Pair Corralation between Brookfield Real and FAM

Allowing for the 90-day total investment horizon Brookfield Real is expected to generate 11.1 times less return on investment than FAM. But when comparing it to its historical volatility, Brookfield Real Assets is 2.78 times less risky than FAM. It trades about 0.09 of its potential returns per unit of risk. FAM is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  647.00  in FAM on September 12, 2024 and sell it today you would earn a total of  27.00  from holding FAM or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	14.29%
Values	Daily Returns

Brookfield Real Assets  vs.  FAM

Brookfield Real Assets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Real Assets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Brookfield Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FAM

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days FAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, FAM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Real and FAM

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

The idea behind Brookfield Real Assets and FAM 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.