Correlation Between North American and Brookfield Office
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Brookfield Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Brookfield Office Properties, you can compare the effects of market volatilities on North American 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 North American with a short position of Brookfield Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Brookfield Office.
Diversification Opportunities for North American and Brookfield Office
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Brookfield is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Brookfield Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Office 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 Construction 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 North American i.e., North American and Brookfield Office go up and down completely randomly.
Pair Corralation between North American and Brookfield Office
Assuming the 90 days trading horizon North American Construction is expected to generate 1.42 times more return on investment than Brookfield Office. However, North American is 1.42 times more volatile than Brookfield Office Properties. It trades about 0.06 of its potential returns per unit of risk. Brookfield Office Properties is currently generating about 0.01 per unit of risk. If you would invest 1,821 in North American Construction on October 7, 2024 and sell it today you would earn a total of 1,322 from holding North American Construction or generate 72.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Brookfield Office Properties
Performance |
| Timeline |
| North American Const |
| Brookfield Office |
North American and Brookfield Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Brookfield Office
The main advantage of trading using opposite North American and Brookfield Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. PHX Energy Services | North American vs. CES Energy Solutions | North American vs. Total Energy Services | North American vs. Pason Systems |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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