Correlation Between Brookfield Property and New Concept

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

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

Diversification Opportunities for Brookfield Property and New Concept

0.52

Correlation Coefficient

Brookfield Property  New Concept

Very weak diversification

The 3 months correlation between Brookfield and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Property Partners and New Concept Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Concept Energy and Brookfield Property 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 Brookfield Property Partners are associated (or correlated) with New Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Concept Energy has no effect on the direction of Brookfield Property i.e., Brookfield Property and New Concept go up and down completely randomly.

Pair Corralation between Brookfield Property and New Concept

Assuming the 90 days horizon Brookfield Property is expected to generate 1.31 times less return on investment than New Concept. But when comparing it to its historical volatility, Brookfield Property Partners is 1.98 times less risky than New Concept. It trades about 0.06 of its potential returns per unit of risk. New Concept Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  104.00  in New Concept Energy on February 6, 2024 and sell it today you would earn a total of  23.00  from holding New Concept Energy or generate 22.12% return on investment over 90 days.

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

Brookfield Property Partners  vs.  New Concept Energy

Brookfield Property

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Property Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Property displayed solid returns over the last few months and may actually be approaching a breakup point.

New Concept Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Concept Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, New Concept reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Property and New Concept

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

The idea behind Brookfield Property Partners and New Concept Energy 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.