Correlation Between Brookfield Infrastructure and Allete
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure and Allete 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 Allete 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 Allete Inc, you can compare the effects of market volatilities on Brookfield Infrastructure and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and Allete.
Diversification Opportunities for Brookfield Infrastructure and Allete
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Brookfield and Allete is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Allete go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and Allete
Assuming the 90 days trading horizon Brookfield Infrastructure is expected to generate 1.44 times less return on investment than Allete. In addition to that, Brookfield Infrastructure is 4.21 times more volatile than Allete Inc. It trades about 0.02 of its total potential returns per unit of risk. Allete Inc is currently generating about 0.15 per unit of volatility. If you would invest 6,267 in Allete Inc on November 2, 2024 and sell it today you would earn a total of 301.00 from holding Allete Inc or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Part vs. Allete Inc
Performance |
| Timeline |
| Brookfield Infrastructure |
| Allete Inc |
Brookfield Infrastructure and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and Allete
The main advantage of trading using opposite Brookfield Infrastructure and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.The idea behind Brookfield Infrastructure Partners and Allete Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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