Correlation Between Brookfield Asset and Western Forest
Can any of the company-specific risk be diversified away by investing in both Brookfield Asset and Western Forest 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 Western Forest 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 Western Forest Products, you can compare the effects of market volatilities on Brookfield Asset and Western Forest 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 Western Forest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Asset and Western Forest.
Diversification Opportunities for Brookfield Asset and Western Forest
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Brookfield and Western is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and Western Forest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Forest Products 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 Western Forest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Forest Products has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and Western Forest go up and down completely randomly.
Pair Corralation between Brookfield Asset and Western Forest
Assuming the 90 days trading horizon Brookfield Asset Management is expected to generate 0.3 times more return on investment than Western Forest. However, Brookfield Asset Management is 3.39 times less risky than Western Forest. It trades about 0.05 of its potential returns per unit of risk. Western Forest Products is currently generating about -0.04 per unit of risk. If you would invest 1,098 in Brookfield Asset Management on December 10, 2024 and sell it today you would earn a total of 123.00 from holding Brookfield Asset Management or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Asset Management vs. Western Forest Products
Performance |
| Timeline |
| Brookfield Asset Man |
| Western Forest Products |
Brookfield Asset and Western Forest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Asset and Western Forest
The main advantage of trading using opposite Brookfield Asset and Western Forest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Asset position performs unexpectedly, Western Forest 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 Western Forest will offset losses from the drop in Western Forest's long position.| Brookfield Asset vs. Osisko Metals | ||
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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 Stocks Directory module to find actively traded stocks across global markets.
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