Correlation Between Western Investment and Brookfield Asset

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

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

Diversification Opportunities for Western Investment and Brookfield Asset

0.19

Correlation Coefficient

Western Investment  Brookfield Asset

Average diversification

The 3 months correlation between Western and Brookfield is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Investment and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and Western Investment 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 Western Investment are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of Western Investment i.e., Western Investment and Brookfield Asset go up and down completely randomly.

Pair Corralation between Western Investment and Brookfield Asset

Given the investment horizon of 90 days Western Investment is expected to generate 0.92 times more return on investment than Brookfield Asset. However, Western Investment is 1.09 times less risky than Brookfield Asset. It trades about 0.09 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.13 per unit of risk. If you would invest  63.00  in Western Investment on December 4, 2024 and sell it today you would earn a total of  2.00  from holding Western Investment or generate 3.17% return on investment over 90 days.

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

Western Investment  vs.  Brookfield Asset Management

Western Investment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Asset Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Brookfield Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Investment and Brookfield Asset

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

The idea behind Western Investment and Brookfield Asset Management 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.