Correlation Between American Express and Brookfield Corp

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Can any of the company-specific risk be diversified away by investing in both American Express and Brookfield Corp 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 American Express and Brookfield Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Brookfield Corp, you can compare the effects of market volatilities on American Express and Brookfield Corp 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 American Express with a short position of Brookfield Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Brookfield Corp.

Diversification Opportunities for American Express and Brookfield Corp

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between American and Brookfield is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp and American Express 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 American Express are associated (or correlated) with Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of American Express i.e., American Express and Brookfield Corp go up and down completely randomly.

Pair Corralation between American Express and Brookfield Corp

Considering the 90-day investment horizon American Express is expected to generate 0.73 times more return on investment than Brookfield Corp. However, American Express is 1.37 times less risky than Brookfield Corp. It trades about 0.22 of its potential returns per unit of risk. Brookfield Corp is currently generating about 0.16 per unit of risk. If you would invest  29,773  in American Express on November 3, 2024 and sell it today you would earn a total of  1,954  from holding American Express or generate 6.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Brookfield Corp

 Performance 
       Timeline  
American Express 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.
Brookfield Corp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

American Express and Brookfield Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and Brookfield Corp

The main advantage of trading using opposite American Express and Brookfield Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Brookfield Corp 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 Corp will offset losses from the drop in Brookfield Corp's long position.
The idea behind American Express and Brookfield Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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