Correlation Between Brookfield and IGM Financial

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

By analyzing existing cross correlation between Brookfield and IGM Financial, you can compare the effects of market volatilities on Brookfield and IGM Financial 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 IGM Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield and IGM Financial.

Diversification Opportunities for Brookfield and IGM Financial

0.95

Correlation Coefficient

Brookfield  IGM Financial

Almost no diversification

The 3 months correlation between Brookfield and IGM is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and IGM Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Financial 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 IGM Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Financial has no effect on the direction of Brookfield i.e., Brookfield and IGM Financial go up and down completely randomly.

Pair Corralation between Brookfield and IGM Financial

Assuming the 90 days horizon Brookfield is expected to generate 2.09 times less return on investment than IGM Financial. In addition to that, Brookfield is 1.43 times more volatile than IGM Financial. It trades about 0.07 of its total potential returns per unit of risk. IGM Financial is currently generating about 0.2 per unit of volatility. If you would invest  4,221  in IGM Financial on September 21, 2024 and sell it today you would earn a total of  421.00  from holding IGM Financial or generate 9.97% return on investment over 90 days.

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

Brookfield  vs.  IGM Financial

Brookfield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IGM Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, IGM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield and IGM Financial

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

The idea behind Brookfield and IGM Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.