Correlation Between IGM Financial and Brookfield

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

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

Diversification Opportunities for IGM Financial and Brookfield

0.95

Correlation Coefficient

IGM Financial  Brookfield

Almost no diversification

The 3 months correlation between IGM and Brookfield is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and IGM Financial 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 IGM Financial are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of IGM Financial i.e., IGM Financial and Brookfield go up and down completely randomly.

Pair Corralation between IGM Financial and Brookfield

Assuming the 90 days trading horizon IGM Financial is expected to generate 0.69 times more return on investment than Brookfield. However, IGM Financial is 1.45 times less risky than Brookfield. It trades about 0.25 of its potential returns per unit of risk. Brookfield is currently generating about 0.14 per unit of risk. If you would invest  3,971  in IGM Financial on September 21, 2024 and sell it today you would earn a total of  671.00  from holding IGM Financial or generate 16.9% return on investment over 90 days.

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

IGM Financial  vs.  Brookfield

IGM Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, IGM Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Brookfield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IGM Financial and Brookfield

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

The idea behind IGM Financial and Brookfield 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.