Correlation Between Brookfield Real and Wells Fargo

Can any of the company-specific risk be diversified away by investing in both Brookfield Real and Wells Fargo 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 Wells Fargo 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 Wells Fargo Income, you can compare the effects of market volatilities on Brookfield Real and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Real and Wells Fargo.

Diversification Opportunities for Brookfield Real and Wells Fargo

0.78

Correlation Coefficient

Brookfield Real  Wells Fargo

Poor diversification

The 3 months correlation between Brookfield and Wells is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Real Assets and Wells Fargo Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Income 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Income has no effect on the direction of Brookfield Real i.e., Brookfield Real and Wells Fargo go up and down completely randomly.

Pair Corralation between Brookfield Real and Wells Fargo

Allowing for the 90-day total investment horizon Brookfield Real Assets is expected to generate 2.75 times more return on investment than Wells Fargo. However, Brookfield Real is 2.75 times more volatile than Wells Fargo Income. It trades about 0.01 of its potential returns per unit of risk. Wells Fargo Income is currently generating about 0.03 per unit of risk. If you would invest  1,271  in Brookfield Real Assets on September 19, 2024 and sell it today you would earn a total of  51.00  from holding Brookfield Real Assets or generate 4.01% return on investment over 90 days.

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

Brookfield Real Assets  vs.  Wells Fargo Income

Brookfield Real Assets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Real Assets has generated negative risk-adjusted returns adding no value to fund investors. 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.

Wells Fargo Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Real and Wells Fargo

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

The idea behind Brookfield Real Assets and Wells Fargo Income 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.