Correlation Between United Parcel and Brookfield

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

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

Diversification Opportunities for United Parcel and Brookfield

0.67

Correlation Coefficient

United Parcel  Brookfield

Poor diversification

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

Pair Corralation between United Parcel and Brookfield

Assuming the 90 days trading horizon United Parcel is expected to generate 9.17 times less return on investment than Brookfield. In addition to that, United Parcel is 1.02 times more volatile than Brookfield. It trades about 0.01 of its total potential returns per unit of risk. Brookfield is currently generating about 0.13 per unit of volatility. If you would invest  5,004  in Brookfield on October 8, 2024 and sell it today you would earn a total of  3,853  from holding Brookfield or generate 77.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

United Parcel Service  vs.  Brookfield

United Parcel Service

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Parcel Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Parcel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Brookfield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Parcel and Brookfield

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

The idea behind United Parcel Service and Brookfield 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.