Correlation Between BRP and Enghouse Systems
Can any of the company-specific risk be diversified away by investing in both BRP and Enghouse Systems 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 BRP and Enghouse Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Enghouse Systems, you can compare the effects of market volatilities on BRP and Enghouse Systems 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 BRP with a short position of Enghouse Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Enghouse Systems.
Diversification Opportunities for BRP and Enghouse Systems
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between BRP and Enghouse is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Enghouse Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enghouse Systems and BRP 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 BRP Inc are associated (or correlated) with Enghouse Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enghouse Systems has no effect on the direction of BRP i.e., BRP and Enghouse Systems go up and down completely randomly.
Pair Corralation between BRP and Enghouse Systems
Assuming the 90 days trading horizon BRP Inc is expected to under-perform the Enghouse Systems. In addition to that, BRP is 1.78 times more volatile than Enghouse Systems. It trades about -0.05 of its total potential returns per unit of risk. Enghouse Systems is currently generating about -0.07 per unit of volatility. If you would invest 2,974 in Enghouse Systems on September 3, 2024 and sell it today you would lose (57.00) from holding Enghouse Systems or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Enghouse Systems
Performance |
| Timeline |
| BRP Inc |
| Enghouse Systems |
BRP and Enghouse Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Enghouse Systems
The main advantage of trading using opposite BRP and Enghouse Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Enghouse Systems 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 Enghouse Systems will offset losses from the drop in Enghouse Systems' long position.The idea behind BRP Inc and Enghouse Systems 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.| Enghouse Systems vs. Kinaxis | Enghouse Systems vs. Open Text Corp | Enghouse Systems vs. Descartes Systems Group | Enghouse Systems vs. Constellation Software |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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