Correlation Between Leons Furniture and Brookfield Investments

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

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

Diversification Opportunities for Leons Furniture and Brookfield Investments

-0.31

Correlation Coefficient

Leons Furniture  Brookfield Investments

Very good diversification

The 3 months correlation between Leons and Brookfield is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments and Leons Furniture 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 Leons Furniture Limited are associated (or correlated) with Brookfield Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Investments has no effect on the direction of Leons Furniture i.e., Leons Furniture and Brookfield Investments go up and down completely randomly.

Pair Corralation between Leons Furniture and Brookfield Investments

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Brookfield Investments. In addition to that, Leons Furniture is 3.32 times more volatile than Brookfield Investments. It trades about -0.13 of its total potential returns per unit of risk. Brookfield Investments is currently generating about 0.02 per unit of volatility. If you would invest  2,513  in Brookfield Investments on September 19, 2024 and sell it today you would earn a total of  2.00  from holding Brookfield Investments or generate 0.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.09%
Values	Daily Returns

Leons Furniture Limited  vs.  Brookfield Investments

Leons Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Brookfield Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leons Furniture and Brookfield Investments

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

The idea behind Leons Furniture Limited and Brookfield Investments 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.