Correlation Between E L and Brookfield Business
Can any of the company-specific risk be diversified away by investing in both E L and Brookfield Business 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 E L and Brookfield Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E L Financial Corp and Brookfield Business Corp, you can compare the effects of market volatilities on E L and Brookfield Business 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 E L with a short position of Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Brookfield Business.
Diversification Opportunities for E L and Brookfield Business
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELF and Brookfield is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and E L 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 E L Financial Corp are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of E L i.e., E L and Brookfield Business go up and down completely randomly.
Pair Corralation between E L and Brookfield Business
Assuming the 90 days trading horizon E L Financial Corp is expected to generate 0.59 times more return on investment than Brookfield Business. However, E L Financial Corp is 1.7 times less risky than Brookfield Business. It trades about 0.13 of its potential returns per unit of risk. Brookfield Business Corp is currently generating about 0.06 per unit of risk. If you would invest 94,334 in E L Financial Corp on September 14, 2024 and sell it today you would earn a total of 45,665 from holding E L Financial Corp or generate 48.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial Corp vs. Brookfield Business Corp
Performance |
| Timeline |
| E L Financial |
| Brookfield Business Corp |
E L and Brookfield Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Brookfield Business
The main advantage of trading using opposite E L and Brookfield Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Brookfield Business 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 Business will offset losses from the drop in Brookfield Business' long position.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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