Correlation Between Brookfield Infrastructure and NewJersey Resources
Can any of the company-specific risk be diversified away by investing in both Brookfield Infrastructure and NewJersey Resources 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 NewJersey Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Infrastructure Corp and NewJersey Resources, you can compare the effects of market volatilities on Brookfield Infrastructure and NewJersey Resources 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 NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Infrastructure and NewJersey Resources.
Diversification Opportunities for Brookfield Infrastructure and NewJersey Resources
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookfield and NewJersey is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Corp and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources 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 Corp are associated (or correlated) with NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and NewJersey Resources go up and down completely randomly.
Pair Corralation between Brookfield Infrastructure and NewJersey Resources
Given the investment horizon of 90 days Brookfield Infrastructure is expected to generate 4.29 times less return on investment than NewJersey Resources. In addition to that, Brookfield Infrastructure is 1.44 times more volatile than NewJersey Resources. It trades about 0.07 of its total potential returns per unit of risk. NewJersey Resources is currently generating about 0.43 per unit of volatility. If you would invest 4,639 in NewJersey Resources on August 28, 2024 and sell it today you would earn a total of 511.00 from holding NewJersey Resources or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Infrastructure Corp vs. NewJersey Resources
Performance |
| Timeline |
| Brookfield Infrastructure |
| NewJersey Resources |
Brookfield Infrastructure and NewJersey Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Infrastructure and NewJersey Resources
The main advantage of trading using opposite Brookfield Infrastructure and NewJersey Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Infrastructure position performs unexpectedly, NewJersey Resources 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 NewJersey Resources will offset losses from the drop in NewJersey Resources' long position.The idea behind Brookfield Infrastructure Corp and NewJersey Resources 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.| NewJersey Resources vs. Atmos Energy | NewJersey Resources vs. UGI Corporation | NewJersey Resources vs. Chesapeake Utilities | NewJersey Resources vs. Spire Inc |
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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