Correlation Between State Street and Brookfield Corp
Can any of the company-specific risk be diversified away by investing in both State Street and Brookfield Corp 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 State Street and Brookfield Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and Brookfield Corp, you can compare the effects of market volatilities on State Street and Brookfield Corp 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 State Street with a short position of Brookfield Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Brookfield Corp.
Diversification Opportunities for State Street and Brookfield Corp
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Brookfield is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp and State Street 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 State Street Corp are associated (or correlated) with Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of State Street i.e., State Street and Brookfield Corp go up and down completely randomly.
Pair Corralation between State Street and Brookfield Corp
Considering the 90-day investment horizon State Street is expected to generate 1.55 times less return on investment than Brookfield Corp. But when comparing it to its historical volatility, State Street Corp is 1.08 times less risky than Brookfield Corp. It trades about 0.04 of its potential returns per unit of risk. Brookfield Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,589 in Brookfield Corp on August 23, 2024 and sell it today you would earn a total of 2,164 from holding Brookfield Corp or generate 60.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. Brookfield Corp
Performance |
| Timeline |
| State Street Corp |
| Brookfield Corp |
State Street and Brookfield Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Brookfield Corp
The main advantage of trading using opposite State Street and Brookfield Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Brookfield Corp 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 Corp will offset losses from the drop in Brookfield Corp's long position.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
| Brookfield Corp vs. KKR Co LP | Brookfield Corp vs. Blackstone Group | Brookfield Corp vs. T Rowe Price | Brookfield Corp vs. Apollo Global Management |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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