Correlation Between Small Cap and Brookfield Global

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

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

Diversification Opportunities for Small Cap and Brookfield Global

-0.49

Correlation Coefficient

Small Cap  Brookfield Global

Very good diversification

The 3 months correlation between Small and Brookfield is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Index and Brookfield Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Global Listed and Small Cap 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 Small Cap Index are associated (or correlated) with Brookfield Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Global Listed has no effect on the direction of Small Cap i.e., Small Cap and Brookfield Global go up and down completely randomly.

Pair Corralation between Small Cap and Brookfield Global

Assuming the 90 days horizon Small Cap Index is expected to generate 1.75 times more return on investment than Brookfield Global. However, Small Cap is 1.75 times more volatile than Brookfield Global Listed. It trades about 0.17 of its potential returns per unit of risk. Brookfield Global Listed is currently generating about -0.01 per unit of risk. If you would invest  1,574  in Small Cap Index on September 4, 2024 and sell it today you would earn a total of  217.00  from holding Small Cap Index or generate 13.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Small Cap Index  vs.  Brookfield Global Listed

Small Cap Index

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Small Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Global Listed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Global Listed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Brookfield Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Brookfield Global

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

The idea behind Small Cap Index and Brookfield Global Listed 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.