Correlation Between Exxon and Brookfield

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

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

Diversification Opportunities for Exxon and Brookfield

-0.48

Correlation Coefficient

Exxon  Brookfield

Very good diversification

The 3 months correlation between Exxon and Brookfield is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Exxon 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 EXXON MOBIL CDR 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 Exxon i.e., Exxon and Brookfield go up and down completely randomly.

Pair Corralation between Exxon and Brookfield

Assuming the 90 days trading horizon Exxon is expected to generate 6.35 times less return on investment than Brookfield. In addition to that, Exxon is 3.03 times more volatile than Brookfield. It trades about 0.01 of its total potential returns per unit of risk. Brookfield is currently generating about 0.11 per unit of volatility. If you would invest  3,926  in Brookfield on October 5, 2024 and sell it today you would earn a total of  4,363  from holding Brookfield or generate 111.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.78%
Values	Daily Returns

EXXON MOBIL CDR  vs.  Brookfield

EXXON MOBIL CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Brookfield

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Brookfield

The main advantage of trading using opposite Exxon and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 EXXON MOBIL CDR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.