Correlation Between Brookfield Infrastructure and Avista
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure and Avista 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 Infrastructure and Avista into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Infrastructure Partners and Avista, you can compare the effects of market volatilities on Brookfield Infrastructure and Avista 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 Infrastructure with a short position of Avista. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Avista.
Diversification Opportunities for Brookfield Infrastructure and Avista
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Brookfield and Avista is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista and Brookfield Infrastructure 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 Infrastructure Partners are associated (or correlated) with Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Avista go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and Avista
Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 1.07 times more return on investment than Avista. However, Brookfield Infrastructure is 1.07 times more volatile than Avista. It trades about 0.03 of its potential returns per unit of risk. Avista is currently generating about 0.01 per unit of risk. If you would invest 1,727 in Brookfield Infrastructure Partners on August 31, 2024 and sell it today you would earn a total of 195.00 from holding Brookfield Infrastructure Partners or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Part vs. Avista
Performance |
| Timeline |
| Brookfield Infrastructure |
| Avista |
Brookfield Infrastructure and Avista Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and Avista
The main advantage of trading using opposite Brookfield Infrastructure and Avista positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure position performs unexpectedly, Avista 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 Avista will offset losses from the drop in Avista's long position.The idea behind Brookfield Infrastructure Partners and Avista 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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