Correlation Between Duke Energy and Brookfield Infrastructure

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

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

Diversification Opportunities for Duke Energy and Brookfield Infrastructure

0.41

Correlation Coefficient

Duke Energy  Brookfield Infrastructure

Very weak diversification

The 3 months correlation between Duke and Brookfield is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and Duke Energy 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 Duke Energy are associated (or correlated) with Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Duke Energy i.e., Duke Energy and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Duke Energy and Brookfield Infrastructure

Assuming the 90 days trading horizon Duke Energy is expected to under-perform the Brookfield Infrastructure. But the preferred stock apears to be less risky and, when comparing its historical volatility, Duke Energy is 2.7 times less risky than Brookfield Infrastructure. The preferred stock trades about -0.28 of its potential returns per unit of risk. The Brookfield Infrastructure Partners is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,869  in Brookfield Infrastructure Partners on September 24, 2024 and sell it today you would lose (28.00) from holding Brookfield Infrastructure Partners or give up 1.5% of portfolio value over 90 days.

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

Duke Energy  vs.  Brookfield Infrastructure Part

Duke Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Duke Energy and Brookfield Infrastructure

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

The idea behind Duke Energy and Brookfield Infrastructure Partners 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.