Correlation Between Brookfield Asset and Lumine

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

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

Diversification Opportunities for Brookfield Asset and Lumine

0.85

Correlation Coefficient

Brookfield Asset  Lumine

Very poor diversification

The 3 months correlation between Brookfield and Lumine is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Asset Management and Lumine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumine Group and Brookfield Asset 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 Brookfield Asset Management are associated (or correlated) with Lumine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumine Group has no effect on the direction of Brookfield Asset i.e., Brookfield Asset and Lumine go up and down completely randomly.

Pair Corralation between Brookfield Asset and Lumine

Assuming the 90 days trading horizon Brookfield Asset Management is expected to generate 0.57 times more return on investment than Lumine. However, Brookfield Asset Management is 1.76 times less risky than Lumine. It trades about 0.33 of its potential returns per unit of risk. Lumine Group is currently generating about 0.17 per unit of risk. If you would invest  6,141  in Brookfield Asset Management on September 15, 2024 and sell it today you would earn a total of  2,033  from holding Brookfield Asset Management or generate 33.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Brookfield Asset Management  vs.  Lumine Group

Brookfield Asset Man

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Brookfield Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

Lumine Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumine Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lumine showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Asset and Lumine

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

The idea behind Brookfield Asset Management and Lumine Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.