Correlation Between Brookfield and RBC European

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

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

Diversification Opportunities for Brookfield and RBC European

-0.41

Correlation Coefficient

Brookfield  RBC European

Very good diversification

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

Pair Corralation between Brookfield and RBC European

Assuming the 90 days trading horizon Brookfield is expected to generate 0.94 times more return on investment than RBC European. However, Brookfield is 1.07 times less risky than RBC European. It trades about 0.1 of its potential returns per unit of risk. RBC European Mid Cap is currently generating about -0.02 per unit of risk. If you would invest  2,305  in Brookfield on September 12, 2024 and sell it today you would earn a total of  92.00  from holding Brookfield or generate 3.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Brookfield  vs.  RBC European Mid Cap

Brookfield

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RBC European Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC European Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC European 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 and RBC European

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

The idea behind Brookfield and RBC European Mid Cap 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.