Correlation Between Canadian Utilities and Brookfield Business

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

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

Diversification Opportunities for Canadian Utilities and Brookfield Business

0.36

Correlation Coefficient

Canadian Utilities  Brookfield Business

Weak diversification

The 3 months correlation between Canadian and Brookfield is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Brookfield Business Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business Corp and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business Corp has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Brookfield Business go up and down completely randomly.

Pair Corralation between Canadian Utilities and Brookfield Business

Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.48 times more return on investment than Brookfield Business. However, Canadian Utilities Limited is 2.08 times less risky than Brookfield Business. It trades about 0.02 of its potential returns per unit of risk. Brookfield Business Corp is currently generating about -0.1 per unit of risk. If you would invest  3,507  in Canadian Utilities Limited on September 19, 2024 and sell it today you would earn a total of  8.00  from holding Canadian Utilities Limited or generate 0.23% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  Brookfield Business Corp

Canadian Utilities

Risk-Adjusted Performance

2 of 100

Weak

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

Brookfield Business Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Utilities and Brookfield Business

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

The idea behind Canadian Utilities Limited and Brookfield Business 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.