Correlation Between Brookfield Infrastructure and Bip Investment
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure and Bip Investment 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 Bip Investment 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 Bip Investment Corp, you can compare the effects of market volatilities on Brookfield Infrastructure and Bip Investment 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 Bip Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Bip Investment.
Diversification Opportunities for Brookfield Infrastructure and Bip Investment
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brookfield and Bip is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Bip Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bip Investment Corp 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 Bip Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bip Investment Corp has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Bip Investment go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and Bip Investment
Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 0.78 times more return on investment than Bip Investment. However, Brookfield Infrastructure Partners is 1.29 times less risky than Bip Investment. It trades about 0.25 of its potential returns per unit of risk. Bip Investment Corp is currently generating about 0.06 per unit of risk. If you would invest 2,426 in Brookfield Infrastructure Partners on September 2, 2024 and sell it today you would earn a total of 74.00 from holding Brookfield Infrastructure Partners or generate 3.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Part vs. Bip Investment Corp
Performance |
| Timeline |
| Brookfield Infrastructure |
| Bip Investment Corp |
Brookfield Infrastructure and Bip Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and Bip Investment
The main advantage of trading using opposite Brookfield Infrastructure and Bip Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure position performs unexpectedly, Bip Investment 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 Bip Investment will offset losses from the drop in Bip Investment's long position.The idea behind Brookfield Infrastructure Partners and Bip Investment 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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