Correlation Between Greenlight Capital and Brookfield Reinsurance

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

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

Diversification Opportunities for Greenlight Capital and Brookfield Reinsurance

0.3

Correlation Coefficient

Greenlight Capital  Brookfield Reinsurance

Weak diversification

The 3 months correlation between Greenlight and Brookfield is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Greenlight Capital Re and Brookfield Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Reinsurance and Greenlight Capital 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 Greenlight Capital Re are associated (or correlated) with Brookfield Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Reinsurance has no effect on the direction of Greenlight Capital i.e., Greenlight Capital and Brookfield Reinsurance go up and down completely randomly.

Pair Corralation between Greenlight Capital and Brookfield Reinsurance

Given the investment horizon of 90 days Greenlight Capital Re is expected to under-perform the Brookfield Reinsurance. In addition to that, Greenlight Capital is 1.12 times more volatile than Brookfield Reinsurance. It trades about -0.02 of its total potential returns per unit of risk. Brookfield Reinsurance is currently generating about -0.01 per unit of volatility. If you would invest  4,131  in Brookfield Reinsurance on January 31, 2024 and sell it today you would lose (44.00) from holding Brookfield Reinsurance or give up 1.07% of portfolio value over 90 days.

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

Greenlight Capital Re  vs.  Brookfield Reinsurance

Greenlight Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlight Capital Re are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Greenlight Capital may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Brookfield Reinsurance

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Reinsurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Reinsurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Greenlight Capital and Brookfield Reinsurance

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

The idea behind Greenlight Capital Re and Brookfield Reinsurance 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.