Correlation Between Brookfield Office and Definity Financial
Can any of the company-specific risk be diversified away by investing in both Brookfield Office and Definity Financial 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 Office and Definity Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Office Properties and Definity Financial Corp, you can compare the effects of market volatilities on Brookfield Office and Definity Financial 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 Office with a short position of Definity Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Office and Definity Financial.
Diversification Opportunities for Brookfield Office and Definity Financial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and Definity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and Definity Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Definity Financial Corp and Brookfield Office 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 Office Properties are associated (or correlated) with Definity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Definity Financial Corp has no effect on the direction of Brookfield Office i.e., Brookfield Office and Definity Financial go up and down completely randomly.
Pair Corralation between Brookfield Office and Definity Financial
Assuming the 90 days trading horizon Brookfield Office is expected to generate 4.05 times less return on investment than Definity Financial. In addition to that, Brookfield Office is 1.22 times more volatile than Definity Financial Corp. It trades about 0.01 of its total potential returns per unit of risk. Definity Financial Corp is currently generating about 0.07 per unit of volatility. If you would invest 3,781 in Definity Financial Corp on September 3, 2024 and sell it today you would earn a total of 2,072 from holding Definity Financial Corp or generate 54.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Office Properties vs. Definity Financial Corp
Performance |
| Timeline |
| Brookfield Office |
| Definity Financial Corp |
Brookfield Office and Definity Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Office and Definity Financial
The main advantage of trading using opposite Brookfield Office and Definity Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Office position performs unexpectedly, Definity Financial 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 Definity Financial will offset losses from the drop in Definity Financial's long position.| Brookfield Office vs. Apple Inc CDR | Brookfield Office vs. Microsoft Corp CDR | Brookfield Office vs. Amazon CDR | Brookfield Office vs. Alphabet Inc CDR |
| Definity Financial vs. Trisura Group | Definity Financial vs. Pet Valu Holdings | Definity Financial vs. Intact Financial | Definity Financial vs. Topaz Energy Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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