Correlation Between United States and Brookfield

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

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

Diversification Opportunities for United States and Brookfield

-0.4

Correlation Coefficient

United States  Brookfield

Very good diversification

The 3 months correlation between United and Brookfield is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and United States 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 States Steel 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 States i.e., United States and Brookfield go up and down completely randomly.

Pair Corralation between United States and Brookfield

Assuming the 90 days trading horizon United States Steel is expected to generate 0.92 times more return on investment than Brookfield. However, United States Steel is 1.09 times less risky than Brookfield. It trades about 0.18 of its potential returns per unit of risk. Brookfield is currently generating about -0.08 per unit of risk. If you would invest  18,655  in United States Steel on December 26, 2024 and sell it today you would earn a total of  4,095  from holding United States Steel or generate 21.95% return on investment over 90 days.

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

United States Steel  vs.  Brookfield

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Brookfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with United States and Brookfield

The main advantage of trading using opposite United States and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 States Steel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.