Correlation Between North American and Brookfield
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Financial and Brookfield, you can compare the effects of market volatilities on North American 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 North American with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Brookfield.
Diversification Opportunities for North American and Brookfield
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Brookfield is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and North American 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 North American Financial 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 North American i.e., North American and Brookfield go up and down completely randomly.
Pair Corralation between North American and Brookfield
Assuming the 90 days trading horizon North American Financial is expected to under-perform the Brookfield. In addition to that, North American is 3.22 times more volatile than Brookfield. It trades about -0.06 of its total potential returns per unit of risk. Brookfield is currently generating about -0.16 per unit of volatility. If you would invest 2,480 in Brookfield on November 6, 2024 and sell it today you would lose (39.00) from holding Brookfield or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Financial vs. Brookfield
Performance |
| Timeline |
| North American Financial |
| Brookfield |
North American and Brookfield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Brookfield
The main advantage of trading using opposite North American and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Dividend Growth Split | North American vs. Dividend 15 Split | North American vs. Financial 15 Split | North American vs. Dividend 15 Split |
| Brookfield vs. Thunderbird Entertainment Group | Brookfield vs. Data Communications Management | Brookfield vs. Postmedia Network Canada | Brookfield vs. Western Investment |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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