Correlation Between Brookfield Business and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Brookfield Business and Dow Jones 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 Brookfield Business and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Partners and Dow Jones Industrial, you can compare the effects of market volatilities on Brookfield Business and Dow Jones 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 Brookfield Business with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and Dow Jones.
Diversification Opportunities for Brookfield Business and Dow Jones
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Brookfield and Dow is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Partners and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Brookfield Business 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 Brookfield Business Partners are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Brookfield Business i.e., Brookfield Business and Dow Jones go up and down completely randomly.
Pair Corralation between Brookfield Business and Dow Jones
Assuming the 90 days trading horizon Brookfield Business Partners is expected to generate 2.44 times more return on investment than Dow Jones. However, Brookfield Business is 2.44 times more volatile than Dow Jones Industrial. It trades about 0.22 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.21 per unit of risk. If you would invest 3,081 in Brookfield Business Partners on August 25, 2024 and sell it today you would earn a total of 364.00 from holding Brookfield Business Partners or generate 11.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Business Partners vs. Dow Jones Industrial
Performance |
| Timeline |
Brookfield Business and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Brookfield Business Partners
Pair trading matchups for Brookfield Business
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Brookfield Business and Dow Jones
The main advantage of trading using opposite Brookfield Business and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Brookfield Business vs. ECN Capital Corp | Brookfield Business vs. Martinrea International | Brookfield Business vs. CCL Industries | Brookfield Business vs. FirstService Corp |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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