Correlation Between Dana and BRP
Can any of the company-specific risk be diversified away by investing in both Dana and BRP 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 Dana and BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and BRP Inc, you can compare the effects of market volatilities on Dana and BRP 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 Dana with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and BRP.
Diversification Opportunities for Dana and BRP
Poor diversification
The 3 months correlation between Dana and BRP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Dana 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 Dana Inc are associated (or correlated) with BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Dana i.e., Dana and BRP go up and down completely randomly.
Pair Corralation between Dana and BRP
Considering the 90-day investment horizon Dana Inc is expected to under-perform the BRP. In addition to that, Dana is 2.31 times more volatile than BRP Inc. It trades about -0.04 of its total potential returns per unit of risk. BRP Inc is currently generating about -0.09 per unit of volatility. If you would invest 5,171 in BRP Inc on August 29, 2024 and sell it today you would lose (276.50) from holding BRP Inc or give up 5.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. BRP Inc
Performance |
| Timeline |
| Dana Inc |
| BRP Inc |
Dana and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and BRP
The main advantage of trading using opposite Dana and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.The idea behind Dana Inc and BRP Inc 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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Global Correlations Find global opportunities by holding instruments from different markets |