Correlation Between Universal and Brookfield

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

By analyzing existing cross correlation between Universal and Brookfield Residential 625, you can compare the effects of market volatilities on Universal 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 Universal with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and Brookfield.

Diversification Opportunities for Universal and Brookfield

0.21

Correlation Coefficient

Universal  Brookfield

Modest diversification

The 3 months correlation between Universal and Brookfield is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Brookfield Residential 625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Residential and Universal 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 Universal 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 Residential has no effect on the direction of Universal i.e., Universal and Brookfield go up and down completely randomly.

Pair Corralation between Universal and Brookfield

Considering the 90-day investment horizon Universal is expected to under-perform the Brookfield. In addition to that, Universal is 2.73 times more volatile than Brookfield Residential 625. It trades about -0.05 of its total potential returns per unit of risk. Brookfield Residential 625 is currently generating about -0.14 per unit of volatility. If you would invest  9,981  in Brookfield Residential 625 on December 2, 2024 and sell it today you would lose (307.00) from holding Brookfield Residential 625 or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.13%
Values	Daily Returns

Universal  vs.  Brookfield Residential 625

Universal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Brookfield Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Residential 625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal and Brookfield

The main advantage of trading using opposite Universal and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal and Brookfield Residential 625 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 CEOs Directory module to screen CEOs from public companies around the world.