Correlation Between Brookfield and Rock Tech

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Can any of the company-specific risk be diversified away by investing in both Brookfield and Rock Tech 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 and Rock Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield and Rock Tech Lithium, you can compare the effects of market volatilities on Brookfield and Rock Tech 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 with a short position of Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield and Rock Tech.

Diversification Opportunities for Brookfield and Rock Tech

BrookfieldRockDiversified AwayBrookfieldRockDiversified Away100%
-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Brookfield and Rock is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium and Brookfield 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 are associated (or correlated) with Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Brookfield i.e., Brookfield and Rock Tech go up and down completely randomly.

Pair Corralation between Brookfield and Rock Tech

Assuming the 90 days horizon Brookfield is expected to under-perform the Rock Tech. But the stock apears to be less risky and, when comparing its historical volatility, Brookfield is 2.75 times less risky than Rock Tech. The stock trades about -0.13 of its potential returns per unit of risk. The Rock Tech Lithium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Rock Tech Lithium on November 25, 2024 and sell it today you would earn a total of  0.00  from holding Rock Tech Lithium or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Brookfield  vs.  Rock Tech Lithium

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-100102030
JavaScript chart by amCharts 3.21.15BN RCK
       Timeline  
Brookfield 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brookfield is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb78808284868890
Rock Tech Lithium 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rock Tech showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.80.911.11.21.31.41.51.6

Brookfield and Rock Tech Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.23-3.92-2.61-1.290.02191.332.694.055.41 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15BN RCK
       Returns  

Pair Trading with Brookfield and Rock Tech

The main advantage of trading using opposite Brookfield and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.
The idea behind Brookfield and Rock Tech Lithium 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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