Correlation Between Brookfield and Topicus

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

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

Diversification Opportunities for Brookfield and Topicus

-0.8

Correlation Coefficient

Brookfield  Topicus

Pay attention - limited upside

The 3 months correlation between Brookfield and Topicus is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus 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 Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of Brookfield i.e., Brookfield and Topicus go up and down completely randomly.

Pair Corralation between Brookfield and Topicus

Assuming the 90 days horizon Brookfield is expected to generate 0.95 times more return on investment than Topicus. However, Brookfield is 1.06 times less risky than Topicus. It trades about 0.24 of its potential returns per unit of risk. Topicus is currently generating about -0.16 per unit of risk. If you would invest  6,850  in Brookfield on September 15, 2024 and sell it today you would earn a total of  1,506  from holding Brookfield or generate 21.99% return on investment over 90 days.

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

Brookfield  vs.  Topicus

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.

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Brookfield and Topicus

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

The idea behind Brookfield and Topicus 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.