Correlation Between Sphere Entertainment and Brookfield Asset

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

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

Diversification Opportunities for Sphere Entertainment and Brookfield Asset

0.72

Correlation Coefficient

Sphere Entertainment  Brookfield Asset

Poor diversification

The 3 months correlation between Sphere and Brookfield is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Brookfield Asset go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Brookfield Asset

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Brookfield Asset. In addition to that, Sphere Entertainment is 1.81 times more volatile than Brookfield Asset Management. It trades about -0.34 of its total potential returns per unit of risk. Brookfield Asset Management is currently generating about -0.16 per unit of volatility. If you would invest  4,194  in Brookfield Asset Management on January 30, 2024 and sell it today you would lose (224.00) from holding Brookfield Asset Management or give up 5.34% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Brookfield Asset Management

Sphere Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical indicators, Sphere Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sphere Entertainment and Brookfield Asset

The main advantage of trading using opposite Sphere Entertainment and Brookfield Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.