Correlation Between State Street and Brookfield Asset
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Brookfield Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and Brookfield Asset Management, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Brookfield Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Brookfield Asset.
Diversification Opportunities for State Street and Brookfield Asset
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between State and Brookfield is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp 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 State Street 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 State Street Corp 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 State Street i.e., State Street and Brookfield Asset go up and down completely randomly.
Pair Corralation between State Street and Brookfield Asset
Considering the 90-day investment horizon State Street Corp is expected to generate 0.85 times more return on investment than Brookfield Asset. However, State Street Corp is 1.17 times less risky than Brookfield Asset. It trades about -0.05 of its potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.17 per unit of risk. If you would invest 7,550 in State Street Corp on January 26, 2024 and sell it today you would lose (121.00) from holding State Street Corp or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. Brookfield Asset Management
Performance |
| Timeline |
| State Street Corp |
| Brookfield Asset Man |
State Street and Brookfield Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Brookfield Asset
The main advantage of trading using opposite State Street and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Invesco Plc | State Street vs. Franklin Resources | State Street vs. T Rowe Price | State Street vs. SEI Investments |
| Brookfield Asset vs. KKR Co LP | Brookfield Asset vs. Blackstone Group | Brookfield Asset vs. Apollo Global Management | Brookfield Asset vs. T Rowe Price |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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