Correlation Between Brookfield Property and Compass

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

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

Diversification Opportunities for Brookfield Property and Compass

-0.45

Correlation Coefficient

Brookfield Property  Compass

Very good diversification

The 3 months correlation between Brookfield and Compass is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Property Preferred and Compass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass and Brookfield Property 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 Property Preferred are associated (or correlated) with Compass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass has no effect on the direction of Brookfield Property i.e., Brookfield Property and Compass go up and down completely randomly.

Pair Corralation between Brookfield Property and Compass

Assuming the 90 days horizon Brookfield Property is expected to generate 5.11 times less return on investment than Compass. But when comparing it to its historical volatility, Brookfield Property Preferred is 2.0 times less risky than Compass. It trades about 0.03 of its potential returns per unit of risk. Compass is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  596.00  in Compass on September 12, 2024 and sell it today you would earn a total of  95.00  from holding Compass or generate 15.94% return on investment over 90 days.

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

Brookfield Property Preferred  vs.  Compass

Brookfield Property

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Property Preferred are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brookfield Property is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Compass

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Property and Compass

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

The idea behind Brookfield Property Preferred and Compass 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.