Correlation Between Leons Furniture and Brookfield Office
Can any of the company-specific risk be diversified away by investing in both Leons Furniture 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 Leons Furniture and Brookfield Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and Brookfield Office Properties, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of Brookfield Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and Brookfield Office.
Diversification Opportunities for Leons Furniture and Brookfield Office
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Leons and Brookfield is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office and Leons Furniture 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 Leons Furniture Limited 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 Leons Furniture i.e., Leons Furniture and Brookfield Office go up and down completely randomly.
Pair Corralation between Leons Furniture and Brookfield Office
Assuming the 90 days trading horizon Leons Furniture is expected to generate 3.67 times less return on investment than Brookfield Office. In addition to that, Leons Furniture is 1.71 times more volatile than Brookfield Office Properties. It trades about 0.04 of its total potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.27 per unit of volatility. If you would invest 1,653 in Brookfield Office Properties on September 1, 2024 and sell it today you would earn a total of 77.00 from holding Brookfield Office Properties or generate 4.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. Brookfield Office Properties
Performance |
| Timeline |
| Leons Furniture |
| Brookfield Office |
Leons Furniture and Brookfield Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and Brookfield Office
The main advantage of trading using opposite Leons Furniture and Brookfield Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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