Correlation Between IShares Canadian and Brookfield Business
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and Brookfield Business 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 IShares Canadian and Brookfield Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian HYBrid and Brookfield Business Partners, you can compare the effects of market volatilities on IShares Canadian and Brookfield Business 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 IShares Canadian with a short position of Brookfield Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Brookfield Business.
Diversification Opportunities for IShares Canadian and Brookfield Business
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Brookfield is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and IShares Canadian 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 iShares Canadian HYBrid are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of IShares Canadian i.e., IShares Canadian and Brookfield Business go up and down completely randomly.
Pair Corralation between IShares Canadian and Brookfield Business
Assuming the 90 days trading horizon IShares Canadian is expected to generate 3.17 times less return on investment than Brookfield Business. But when comparing it to its historical volatility, iShares Canadian HYBrid is 6.41 times less risky than Brookfield Business. It trades about 0.17 of its potential returns per unit of risk. Brookfield Business Partners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,026 in Brookfield Business Partners on September 12, 2024 and sell it today you would earn a total of 1,505 from holding Brookfield Business Partners or generate 74.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Canadian HYBrid vs. Brookfield Business Partners
Performance |
| Timeline |
| iShares Canadian HYBrid |
| Brookfield Business |
IShares Canadian and Brookfield Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and Brookfield Business
The main advantage of trading using opposite IShares Canadian and Brookfield Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, Brookfield Business 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 Business will offset losses from the drop in Brookfield Business' long position.| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
| Brookfield Business vs. Current Water Technologies | Brookfield Business vs. Plurilock Security | Brookfield Business vs. PowerBand Solutions | Brookfield Business vs. iShares Canadian HYBrid |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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