Correlation Between Brookfield Office and North American
Can any of the company-specific risk be diversified away by investing in both Brookfield Office and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on Brookfield Office and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Office and North American.
Diversification Opportunities for Brookfield Office and North American
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Brookfield and North is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Brookfield Office i.e., Brookfield Office and North American go up and down completely randomly.
Pair Corralation between Brookfield Office and North American
Assuming the 90 days trading horizon Brookfield Office Properties is expected to under-perform the North American. In addition to that, Brookfield Office is 1.2 times more volatile than North American Construction. It trades about -0.11 of its total potential returns per unit of risk. North American Construction is currently generating about 0.27 per unit of volatility. If you would invest 2,940 in North American Construction on October 7, 2024 and sell it today you would earn a total of 203.00 from holding North American Construction or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Office Properties vs. North American Construction
Performance |
| Timeline |
| Brookfield Office |
| North American Const |
Brookfield Office and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Office and North American
The main advantage of trading using opposite Brookfield Office and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Office position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Brookfield Office vs. Environmental Waste International | Brookfield Office vs. BluMetric Environmental | Brookfield Office vs. Enduro Metals Corp | Brookfield Office vs. Partners Value Investments |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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