Correlation Between Aura Minerals and Brookfield

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

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

Diversification Opportunities for Aura Minerals and Brookfield

0.64

Correlation Coefficient

Aura Minerals  Brookfield

Poor diversification

The 3 months correlation between Aura and Brookfield is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aura Minerals and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Aura Minerals 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 Aura Minerals 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 Aura Minerals i.e., Aura Minerals and Brookfield go up and down completely randomly.

Pair Corralation between Aura Minerals and Brookfield

Assuming the 90 days trading horizon Aura Minerals is expected to generate 3.57 times more return on investment than Brookfield. However, Aura Minerals is 3.57 times more volatile than Brookfield. It trades about 0.08 of its potential returns per unit of risk. Brookfield is currently generating about 0.17 per unit of risk. If you would invest  1,588  in Aura Minerals on September 26, 2024 and sell it today you would earn a total of  167.00  from holding Aura Minerals or generate 10.52% return on investment over 90 days.

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

Aura Minerals  vs.  Brookfield

Aura Minerals

Risk-Adjusted Performance

6 of 100

Modest

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

Brookfield

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Brookfield may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aura Minerals and Brookfield

The main advantage of trading using opposite Aura Minerals and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aura Minerals 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 Aura Minerals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.