Correlation Between Entergy Texas and Brookfield Infrastructure

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

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

Diversification Opportunities for Entergy Texas and Brookfield Infrastructure

0.51

Correlation Coefficient

Entergy Texas  Brookfield Infrastructure

Very weak diversification

The 3 months correlation between Entergy and Brookfield is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Texas and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and Entergy Texas 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 Entergy Texas 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 Entergy Texas i.e., Entergy Texas and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Entergy Texas and Brookfield Infrastructure

Assuming the 90 days horizon Entergy Texas is expected to under-perform the Brookfield Infrastructure. In addition to that, Entergy Texas is 1.03 times more volatile than Brookfield Infrastructure Partners. It trades about -0.27 of its total potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about -0.07 per unit of volatility. 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

Entergy Texas  vs.  Brookfield Infrastructure Part

Entergy Texas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Texas has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 Entergy Texas and Brookfield Infrastructure

The main advantage of trading using opposite Entergy Texas and Brookfield Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Texas 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 Entergy Texas 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.