Correlation Between Carlyle and Brookfield Corp

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

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

Diversification Opportunities for Carlyle and Brookfield Corp

0.93

Correlation Coefficient

Carlyle  Brookfield Corp

Almost no diversification

The 3 months correlation between Carlyle and Brookfield is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Brookfield Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Corp and Carlyle 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 Carlyle Group are associated (or correlated) with Brookfield Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Corp has no effect on the direction of Carlyle i.e., Carlyle and Brookfield Corp go up and down completely randomly.

Pair Corralation between Carlyle and Brookfield Corp

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 1.48 times more return on investment than Brookfield Corp. However, Carlyle is 1.48 times more volatile than Brookfield Corp. It trades about 0.25 of its potential returns per unit of risk. Brookfield Corp is currently generating about 0.28 per unit of risk. If you would invest  3,822  in Carlyle Group on September 1, 2024 and sell it today you would earn a total of  1,501  from holding Carlyle Group or generate 39.27% return on investment over 90 days.

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

Carlyle Group  vs.  Brookfield Corp

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Brookfield Corp

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

The idea behind Carlyle Group and Brookfield Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.