Correlation Between Brookfield and Lumine

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

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

Diversification Opportunities for Brookfield and Lumine

0.87

Correlation Coefficient

Brookfield  Lumine

Very poor diversification

The 3 months correlation between Brookfield and Lumine is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Lumine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumine Group 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 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 i.e., Brookfield and Lumine go up and down completely randomly.

Pair Corralation between Brookfield and Lumine

Assuming the 90 days horizon Brookfield is expected to generate 1.27 times less return on investment than Lumine. But when comparing it to its historical volatility, Brookfield is 1.79 times less risky than Lumine. It trades about 0.24 of its potential returns per unit of risk. Lumine Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,470  in Lumine Group on September 16, 2024 and sell it today you would earn a total of  949.00  from holding Lumine Group or generate 27.35% return on investment over 90 days.

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

Brookfield  vs.  Lumine Group

Brookfield

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield 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 and Lumine

The main advantage of trading using opposite Brookfield and Lumine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield 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 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.