Correlation Between Brookfield Infrastructure and Emera

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

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

Diversification Opportunities for Brookfield Infrastructure and Emera

0.41

Correlation Coefficient

Brookfield Infrastructure  Emera

Very weak diversification

The 3 months correlation between Brookfield and Emera is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Infrastructure Part and Emera Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Inc and Brookfield Infrastructure 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 Infrastructure Partners are associated (or correlated) with Emera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Inc has no effect on the direction of Brookfield Infrastructure i.e., Brookfield Infrastructure and Emera go up and down completely randomly.

Pair Corralation between Brookfield Infrastructure and Emera

Assuming the 90 days trading horizon Brookfield Infrastructure Partners is expected to generate 1.05 times more return on investment than Emera. However, Brookfield Infrastructure is 1.05 times more volatile than Emera Inc. It trades about 0.07 of its potential returns per unit of risk. Emera Inc is currently generating about 0.06 per unit of risk. If you would invest  1,663  in Brookfield Infrastructure Partners on September 14, 2024 and sell it today you would earn a total of  703.00  from holding Brookfield Infrastructure Partners or generate 42.27% return on investment over 90 days.

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

Brookfield Infrastructure Part  vs.  Emera Inc

Brookfield Infrastructure

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Infrastructure Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Infrastructure is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emera Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Emera is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brookfield Infrastructure and Emera

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

The idea behind Brookfield Infrastructure Partners and Emera Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.