Correlation Between Tejon Ranch and Brookfield Business

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

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

Diversification Opportunities for Tejon Ranch and Brookfield Business

-0.43

Correlation Coefficient

Tejon Ranch  Brookfield Business

Very good diversification

The 3 months correlation between Tejon and Brookfield is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tejon Ranch Co and Brookfield Business Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Business and Tejon Ranch 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 Tejon Ranch Co are associated (or correlated) with Brookfield Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Business has no effect on the direction of Tejon Ranch i.e., Tejon Ranch and Brookfield Business go up and down completely randomly.

Pair Corralation between Tejon Ranch and Brookfield Business

Considering the 90-day investment horizon Tejon Ranch Co is expected to under-perform the Brookfield Business. In addition to that, Tejon Ranch is 1.05 times more volatile than Brookfield Business Partners. It trades about -0.07 of its total potential returns per unit of risk. Brookfield Business Partners is currently generating about 0.21 per unit of volatility. If you would invest  2,040  in Brookfield Business Partners on August 30, 2024 and sell it today you would earn a total of  568.00  from holding Brookfield Business Partners or generate 27.84% return on investment over 90 days.

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

Tejon Ranch Co  vs.  Brookfield Business Partners

Tejon Ranch

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tejon Ranch Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Brookfield Business

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Business Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Brookfield Business unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tejon Ranch and Brookfield Business

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

The idea behind Tejon Ranch Co and Brookfield Business Partners 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.