Correlation Between Brookfield Business and European Residential
Can any of the company-specific risk be diversified away by investing in both Brookfield Business and European Residential 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 European Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Business Corp and European Residential Real, you can compare the effects of market volatilities on Brookfield Business and European Residential 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 European Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Business and European Residential.
Diversification Opportunities for Brookfield Business and European Residential
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Brookfield and European is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Business Corp and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 Corp are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of Brookfield Business i.e., Brookfield Business and European Residential go up and down completely randomly.
Pair Corralation between Brookfield Business and European Residential
Assuming the 90 days trading horizon Brookfield Business Corp is expected to generate 0.77 times more return on investment than European Residential. However, Brookfield Business Corp is 1.29 times less risky than European Residential. It trades about 0.69 of its potential returns per unit of risk. European Residential Real is currently generating about 0.16 per unit of risk. If you would invest 3,387 in Brookfield Business Corp on December 5, 2024 and sell it today you would earn a total of 560.00 from holding Brookfield Business Corp or generate 16.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Business Corp vs. European Residential Real
Performance |
| Timeline |
| Brookfield Business Corp |
| European Residential Real |
Brookfield Business and European Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Business and European Residential
The main advantage of trading using opposite Brookfield Business and European Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Business position performs unexpectedly, European Residential 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 European Residential will offset losses from the drop in European Residential's long position.| Brookfield Business vs. Thunderbird Entertainment Group | ||
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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