Correlation Between Financial and Brookfield Office
Can any of the company-specific risk be diversified away by investing in both Financial and Brookfield Office 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 Financial and Brookfield Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and Brookfield Office Properties, you can compare the effects of market volatilities on Financial and Brookfield Office 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 Financial with a short position of Brookfield Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Brookfield Office.
Diversification Opportunities for Financial and Brookfield Office
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and Brookfield is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office and Financial 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 Financial 15 Split are associated (or correlated) with Brookfield Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Office has no effect on the direction of Financial i.e., Financial and Brookfield Office go up and down completely randomly.
Pair Corralation between Financial and Brookfield Office
Assuming the 90 days trading horizon Financial is expected to generate 2.56 times less return on investment than Brookfield Office. But when comparing it to its historical volatility, Financial 15 Split is 7.13 times less risky than Brookfield Office. It trades about 0.65 of its potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,665 in Brookfield Office Properties on October 29, 2024 and sell it today you would earn a total of 91.00 from holding Brookfield Office Properties or generate 5.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. Brookfield Office Properties
Performance |
| Timeline |
| Financial 15 Split |
| Brookfield Office |
Financial and Brookfield Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and Brookfield Office
The main advantage of trading using opposite Financial and Brookfield Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, Brookfield Office 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 Office will offset losses from the drop in Brookfield Office's long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
| Brookfield Office vs. Prime Dividend Corp | Brookfield Office vs. Canadian Life Companies | Brookfield Office vs. Financial 15 Split | Brookfield Office vs. Dividend 15 Split |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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