Correlation Between BRP and Open Text
Can any of the company-specific risk be diversified away by investing in both BRP and Open Text 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 Open Text into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Open Text Corp, you can compare the effects of market volatilities on BRP and Open Text 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 Open Text. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Open Text.
Diversification Opportunities for BRP and Open Text
Poor diversification
The 3 months correlation between BRP and Open is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of BRP i.e., BRP and Open Text go up and down completely randomly.
Pair Corralation between BRP and Open Text
Assuming the 90 days trading horizon BRP Inc is expected to under-perform the Open Text. In addition to that, BRP is 1.56 times more volatile than Open Text Corp. It trades about -0.05 of its total potential returns per unit of risk. Open Text Corp is currently generating about -0.04 per unit of volatility. If you would invest 3,625 in Open Text Corp on January 12, 2025 and sell it today you would lose (129.00) from holding Open Text Corp or give up 3.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BRP Inc vs. Open Text Corp
Performance |
| Timeline |
| BRP Inc |
| Open Text Corp |
BRP and Open Text Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Open Text
The main advantage of trading using opposite BRP and Open Text positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Open Text 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 Open Text will offset losses from the drop in Open Text's long position.The idea behind BRP Inc and Open Text Corp 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.| Open Text vs. DIRTT Environmental Solutions | Open Text vs. BluMetric Environmental | Open Text vs. Contagious Gaming | Open Text vs. Applied Materials, |
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.
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