Correlation Between Solar Alliance and Brookfield Office

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

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

Diversification Opportunities for Solar Alliance and Brookfield Office

-0.67

Correlation Coefficient

Solar Alliance  Brookfield Office

Excellent diversification

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

Pair Corralation between Solar Alliance and Brookfield Office

Assuming the 90 days trading horizon Solar Alliance Energy is expected to under-perform the Brookfield Office. In addition to that, Solar Alliance is 12.44 times more volatile than Brookfield Office Properties. It trades about -0.01 of its total potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.2 per unit of volatility. If you would invest  1,450  in Brookfield Office Properties on September 22, 2024 and sell it today you would earn a total of  218.00  from holding Brookfield Office Properties or generate 15.03% return on investment over 90 days.

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

Solar Alliance Energy  vs.  Brookfield Office Properties

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Brookfield Office

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solar Alliance and Brookfield Office

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

The idea behind Solar Alliance Energy and Brookfield Office Properties 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.