Correlation Between Dollarama and Brookfield
Can any of the company-specific risk be diversified away by investing in both Dollarama and Brookfield 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 Dollarama and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Brookfield, you can compare the effects of market volatilities on Dollarama and Brookfield 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 Dollarama with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Brookfield.
Diversification Opportunities for Dollarama and Brookfield
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dollarama and Brookfield is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Dollarama 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 Dollarama are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Dollarama i.e., Dollarama and Brookfield go up and down completely randomly.
Pair Corralation between Dollarama and Brookfield
Assuming the 90 days trading horizon Dollarama is expected to generate 1.12 times less return on investment than Brookfield. But when comparing it to its historical volatility, Dollarama is 1.32 times less risky than Brookfield. It trades about 0.1 of its potential returns per unit of risk. Brookfield is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,710 in Brookfield on August 30, 2024 and sell it today you would earn a total of 3,899 from holding Brookfield or generate 82.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollarama vs. Brookfield
Performance |
| Timeline |
| Dollarama |
| Brookfield |
Dollarama and Brookfield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Brookfield
The main advantage of trading using opposite Dollarama and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Brookfield 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 Brookfield will offset losses from the drop in Brookfield's long position.| Dollarama vs. Canadian Tire | Dollarama vs. Loblaw Companies Limited | Dollarama vs. Metro Inc | Dollarama vs. Canadian National Railway |
| Brookfield vs. Microsoft Corp CDR | Brookfield vs. Apple Inc CDR | Brookfield vs. Alphabet Inc CDR | Brookfield vs. Amazon CDR |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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