Correlation Between FAM and Brookfield Real

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

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

Diversification Opportunities for FAM and Brookfield Real

0.39

Correlation Coefficient

FAM  Brookfield Real

Weak diversification

The 3 months correlation between FAM and Brookfield is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding FAM and Brookfield Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Real Assets and FAM 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 FAM are associated (or correlated) with Brookfield Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Real Assets has no effect on the direction of FAM i.e., FAM and Brookfield Real go up and down completely randomly.

Pair Corralation between FAM and Brookfield Real

Considering the 90-day investment horizon FAM is expected to generate 0.7 times more return on investment than Brookfield Real. However, FAM is 1.44 times less risky than Brookfield Real. It trades about 0.09 of its potential returns per unit of risk. Brookfield Real Assets is currently generating about 0.01 per unit of risk. If you would invest  488.00  in FAM on September 12, 2024 and sell it today you would earn a total of  186.00  from holding FAM or generate 38.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.07%
Values	Daily Returns

FAM  vs.  Brookfield Real Assets

FAM

Risk-Adjusted Performance

0 of 100

Strong

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

Brookfield Real Assets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Real Assets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Brookfield Real is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FAM and Brookfield Real

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

The idea behind FAM and Brookfield Real Assets 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.