Correlation Between TPG and Brookfield Asset

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

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

Diversification Opportunities for TPG and Brookfield Asset

0.94

Correlation Coefficient

TPG  Brookfield Asset

Almost no diversification

The 3 months correlation between TPG and Brookfield is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding TPG Inc and Brookfield Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Asset Man and TPG 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 TPG Inc are associated (or correlated) with Brookfield Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Asset Man has no effect on the direction of TPG i.e., TPG and Brookfield Asset go up and down completely randomly.

Pair Corralation between TPG and Brookfield Asset

Considering the 90-day investment horizon TPG Inc is expected to generate 1.67 times more return on investment than Brookfield Asset. However, TPG is 1.67 times more volatile than Brookfield Asset Management. It trades about 0.25 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about 0.39 per unit of risk. If you would invest  4,855  in TPG Inc on September 1, 2024 and sell it today you would earn a total of  2,141  from holding TPG Inc or generate 44.1% return on investment over 90 days.

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

TPG Inc  vs.  Brookfield Asset Management

TPG Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TPG Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TPG reported solid returns over the last few months and may actually be approaching a breakup point.

Brookfield Asset Man

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Asset Management are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Asset displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TPG and Brookfield Asset

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

The idea behind TPG Inc and Brookfield Asset Management 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.