Correlation Between Vanguard Global and Brookfield Global

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

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

Diversification Opportunities for Vanguard Global and Brookfield Global

0.81

Correlation Coefficient

Vanguard Global  Brookfield Global

Very poor diversification

The 3 months correlation between Vanguard and Brookfield is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Ex Us and Brookfield Global Listed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Global Listed and Vanguard Global 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 Vanguard Global Ex Us are associated (or correlated) with Brookfield Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Global Listed has no effect on the direction of Vanguard Global i.e., Vanguard Global and Brookfield Global go up and down completely randomly.

Pair Corralation between Vanguard Global and Brookfield Global

Assuming the 90 days horizon Vanguard Global Ex Us is expected to under-perform the Brookfield Global. In addition to that, Vanguard Global is 1.14 times more volatile than Brookfield Global Listed. It trades about -0.04 of its total potential returns per unit of risk. Brookfield Global Listed is currently generating about -0.02 per unit of volatility. If you would invest  1,181  in Brookfield Global Listed on September 4, 2024 and sell it today you would lose (11.00) from holding Brookfield Global Listed or give up 0.93% of portfolio value over 90 days.

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

Vanguard Global Ex Us  vs.  Brookfield Global Listed

Vanguard Global Ex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Global Ex Us has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Vanguard Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Global Listed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Global Listed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Brookfield Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Global and Brookfield Global

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

The idea behind Vanguard Global Ex Us and Brookfield Global Listed 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.