Correlation Between BRP and Freedom Bank
Can any of the company-specific risk be diversified away by investing in both BRP and Freedom Bank 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 Freedom Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Freedom Bank of, you can compare the effects of market volatilities on BRP and Freedom Bank 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 Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Freedom Bank.
Diversification Opportunities for BRP and Freedom Bank
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BRP and Freedom is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of BRP i.e., BRP and Freedom Bank go up and down completely randomly.
Pair Corralation between BRP and Freedom Bank
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Freedom Bank. In addition to that, BRP is 3.13 times more volatile than Freedom Bank of. It trades about -0.04 of its total potential returns per unit of risk. Freedom Bank of is currently generating about 0.06 per unit of volatility. If you would invest 1,053 in Freedom Bank of on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Freedom Bank of or generate 0.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Freedom Bank of
Performance |
| Timeline |
| BRP Inc |
| Freedom Bank |
BRP and Freedom Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Freedom Bank
The main advantage of trading using opposite BRP and Freedom Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Freedom Bank 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 Freedom Bank will offset losses from the drop in Freedom Bank's long position.The idea behind BRP Inc and Freedom Bank of 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.| Freedom Bank vs. HUMANA INC | Freedom Bank vs. SCOR PK | Freedom Bank vs. Aquagold International | Freedom Bank vs. Thrivent High Yield |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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