Correlation Between BlackRock and Brookfield Asset

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

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

Diversification Opportunities for BlackRock and Brookfield Asset

0.84

Correlation Coefficient

BlackRock  Brookfield Asset

Very poor diversification

The 3 months correlation between BlackRock and Brookfield is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock 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 BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Brookfield Asset go up and down completely randomly.

Pair Corralation between BlackRock and Brookfield Asset

Considering the 90-day investment horizon BlackRock is expected to under-perform the Brookfield Asset. But the stock apears to be less risky and, when comparing its historical volatility, BlackRock is 1.22 times less risky than Brookfield Asset. The stock trades about -0.34 of its potential returns per unit of risk. The Brookfield Asset Management is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  4,180  in Brookfield Asset Management on January 27, 2024 and sell it today you would lose (283.00) from holding Brookfield Asset Management or give up 6.77% of portfolio value over 90 days.

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

BlackRock  vs.  Brookfield Asset Management

BlackRock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Brookfield Asset Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brookfield Asset is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BlackRock and Brookfield Asset

The main advantage of trading using opposite BlackRock and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.