Correlation Between RenaissanceRe Holdings and Brookfield Wealth

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

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

Diversification Opportunities for RenaissanceRe Holdings and Brookfield Wealth

-0.35

Correlation Coefficient

RenaissanceRe Holdings  Brookfield Wealth

Very good diversification

The 3 months correlation between RenaissanceRe and Brookfield is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding RenaissanceRe Holdings and Brookfield Wealth Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Wealth and RenaissanceRe Holdings 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 RenaissanceRe Holdings are associated (or correlated) with Brookfield Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Wealth has no effect on the direction of RenaissanceRe Holdings i.e., RenaissanceRe Holdings and Brookfield Wealth go up and down completely randomly.

Pair Corralation between RenaissanceRe Holdings and Brookfield Wealth

Assuming the 90 days trading horizon RenaissanceRe Holdings is expected to generate 24.46 times less return on investment than Brookfield Wealth. But when comparing it to its historical volatility, RenaissanceRe Holdings is 3.3 times less risky than Brookfield Wealth. It trades about 0.04 of its potential returns per unit of risk. Brookfield Wealth Solutions is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,784  in Brookfield Wealth Solutions on September 2, 2024 and sell it today you would earn a total of  1,355  from holding Brookfield Wealth Solutions or generate 28.32% return on investment over 90 days.

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

RenaissanceRe Holdings  vs.  Brookfield Wealth Solutions

RenaissanceRe Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RenaissanceRe Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RenaissanceRe Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brookfield Wealth

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Wealth Solutions are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brookfield Wealth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RenaissanceRe Holdings and Brookfield Wealth

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

The idea behind RenaissanceRe Holdings and Brookfield Wealth Solutions 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..