Correlation Between Plaza Retail and Brookfield Investments

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

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

Diversification Opportunities for Plaza Retail and Brookfield Investments

-0.42

Correlation Coefficient

Plaza Retail  Brookfield Investments

Very good diversification

The 3 months correlation between Plaza and Brookfield is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Plaza Retail REIT and Brookfield Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Investments and Plaza Retail 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 Plaza Retail REIT 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 Plaza Retail i.e., Plaza Retail and Brookfield Investments go up and down completely randomly.

Pair Corralation between Plaza Retail and Brookfield Investments

Assuming the 90 days trading horizon Plaza Retail REIT is expected to under-perform the Brookfield Investments. In addition to that, Plaza Retail is 1.76 times more volatile than Brookfield Investments. It trades about -0.19 of its total potential returns per unit of risk. Brookfield Investments is currently generating about 0.04 per unit of volatility. If you would invest  2,500  in Brookfield Investments on September 30, 2024 and sell it today you would earn a total of  13.00  from holding Brookfield Investments or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.56%
Values	Daily Returns

Plaza Retail REIT  vs.  Brookfield Investments

Plaza Retail REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Brookfield Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 3 (%) 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 Plaza Retail and Brookfield Investments

The main advantage of trading using opposite Plaza Retail and Brookfield Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plaza Retail 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 Plaza Retail REIT 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.