Correlation Between Sofina Société and Brookfield Corp

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

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

Diversification Opportunities for Sofina Société and Brookfield Corp

-0.67

Correlation Coefficient

Sofina Société  Brookfield Corp

Excellent diversification

The 3 months correlation between Sofina and Brookfield is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp and Sofina Société 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 Sofina Socit Anonyme are associated (or correlated) with Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of Sofina Société i.e., Sofina Société and Brookfield Corp go up and down completely randomly.

Pair Corralation between Sofina Société and Brookfield Corp

Assuming the 90 days horizon Sofina Socit Anonyme is not expected to generate positive returns. However, Sofina Socit Anonyme is 20.45 times less risky than Brookfield Corp. It waists most of its returns potential to compensate for thr risk taken. Brookfield Corp is generating about 0.1 per unit of risk. If you would invest  5,398  in Brookfield Corp on October 23, 2024 and sell it today you would earn a total of  566.00  from holding Brookfield Corp or generate 10.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sofina Socit Anonyme  vs.  Brookfield Corp

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sofina Société is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Brookfield Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sofina Société and Brookfield Corp

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

The idea behind Sofina Socit Anonyme and Brookfield 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.