Correlation Between Brookfield Reinsurance and Maiden Holdings

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

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

Diversification Opportunities for Brookfield Reinsurance and Maiden Holdings

0.1

Correlation Coefficient

Brookfield Reinsurance  Maiden Holdings

Average diversification

The 3 months correlation between Brookfield and Maiden is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Reinsurance and Maiden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maiden Holdings and Brookfield Reinsurance 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 Reinsurance are associated (or correlated) with Maiden Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maiden Holdings has no effect on the direction of Brookfield Reinsurance i.e., Brookfield Reinsurance and Maiden Holdings go up and down completely randomly.

Pair Corralation between Brookfield Reinsurance and Maiden Holdings

Given the investment horizon of 90 days Brookfield Reinsurance is expected to generate 0.38 times more return on investment than Maiden Holdings. However, Brookfield Reinsurance is 2.66 times less risky than Maiden Holdings. It trades about 0.28 of its potential returns per unit of risk. Maiden Holdings is currently generating about 0.0 per unit of risk. If you would invest  4,742  in Brookfield Reinsurance on September 4, 2024 and sell it today you would earn a total of  1,028  from holding Brookfield Reinsurance or generate 21.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

Brookfield Reinsurance  vs.  Maiden Holdings

Brookfield Reinsurance

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Brookfield Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, Brookfield Reinsurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Maiden Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maiden Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Maiden Holdings is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brookfield Reinsurance and Maiden Holdings

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

The idea behind Brookfield Reinsurance and Maiden Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.