Correlation Between Brookfield Asset and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Brookfield Asset and NextSource Materials 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 Asset and NextSource Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Asset Management and NextSource Materials, you can compare the effects of market volatilities on Brookfield Asset and NextSource Materials 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 Asset with a short position of NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Asset and NextSource Materials.
Diversification Opportunities for Brookfield Asset and NextSource Materials
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Brookfield and NextSource is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Brookfield Asset 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 Asset Management are associated (or correlated) with NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and NextSource Materials go up and down completely randomly.
Pair Corralation between Brookfield Asset and NextSource Materials
Assuming the 90 days trading horizon Brookfield Asset is expected to generate 2.25 times less return on investment than NextSource Materials. But when comparing it to its historical volatility, Brookfield Asset Management is 8.38 times less risky than NextSource Materials. It trades about 0.22 of its potential returns per unit of risk. NextSource Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 76.00 in NextSource Materials on November 3, 2024 and sell it today you would earn a total of 3.00 from holding NextSource Materials or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Asset Management vs. NextSource Materials
Performance |
| Timeline |
| Brookfield Asset Man |
| NextSource Materials |
Brookfield Asset and NextSource Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Asset and NextSource Materials
The main advantage of trading using opposite Brookfield Asset and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Asset position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.| Brookfield Asset vs. Monument Mining Limited | Brookfield Asset vs. Thunderbird Entertainment Group | Brookfield Asset vs. Bird Construction | Brookfield Asset vs. Aya Gold Silver |
| NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Northern Graphite | NextSource Materials vs. Lomiko Metals | NextSource Materials vs. Elcora Advanced Materials |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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