Correlation Between IShares Canadian and Brookfield Business

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

By analyzing existing cross correlation between iShares Canadian HYBrid and Brookfield Business Partners, you can compare the effects of market volatilities on IShares Canadian and Brookfield Business 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 IShares Canadian with a short position of Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Brookfield Business.

Diversification Opportunities for IShares Canadian and Brookfield Business

0.4

Correlation Coefficient

IShares Canadian  Brookfield Business

Very weak diversification

The 3 months correlation between IShares and Brookfield is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and IShares Canadian 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 iShares Canadian HYBrid are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of IShares Canadian i.e., IShares Canadian and Brookfield Business go up and down completely randomly.

Pair Corralation between IShares Canadian and Brookfield Business

Assuming the 90 days trading horizon iShares Canadian HYBrid is expected to generate 0.13 times more return on investment than Brookfield Business. However, iShares Canadian HYBrid is 7.48 times less risky than Brookfield Business. It trades about 0.09 of its potential returns per unit of risk. Brookfield Business Partners is currently generating about -0.01 per unit of risk. If you would invest  1,947  in iShares Canadian HYBrid on October 21, 2024 and sell it today you would earn a total of  31.00  from holding iShares Canadian HYBrid or generate 1.59% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Brookfield Business Partners

iShares Canadian HYBrid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brookfield Business

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Canadian and Brookfield Business

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

The idea behind iShares Canadian HYBrid and Brookfield Business Partners 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.