Correlation Between European Residential and Brookfield

Can any of the company-specific risk be diversified away by investing in both European Residential and Brookfield 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 European Residential and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between European Residential Real and Brookfield, you can compare the effects of market volatilities on European Residential and Brookfield 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 European Residential with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Brookfield.

Diversification Opportunities for European Residential and Brookfield

-0.56

Correlation Coefficient

European Residential  Brookfield

Excellent diversification

The 3 months correlation between European and Brookfield is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and European Residential 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 European Residential Real are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of European Residential i.e., European Residential and Brookfield go up and down completely randomly.

Pair Corralation between European Residential and Brookfield

Assuming the 90 days trading horizon European Residential is expected to generate 11.59 times less return on investment than Brookfield. In addition to that, European Residential is 1.02 times more volatile than Brookfield. It trades about 0.01 of its total potential returns per unit of risk. Brookfield is currently generating about 0.07 per unit of volatility. If you would invest  2,268  in Brookfield on April 4, 2024 and sell it today you would earn a total of  39.00  from holding Brookfield or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

European Residential Real  vs.  Brookfield

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, European Residential is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brookfield

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Pair Trading with European Residential and Brookfield

The main advantage of trading using opposite European Residential and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Residential position performs unexpectedly, Brookfield 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 will offset losses from the drop in Brookfield's long position.

The idea behind European Residential Real and Brookfield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..