Correlation Between BRP and Lucid
Can any of the company-specific risk be diversified away by investing in both BRP and Lucid 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 Lucid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Lucid Group, you can compare the effects of market volatilities on BRP and Lucid 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 Lucid. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Lucid.
Diversification Opportunities for BRP and Lucid
Almost no diversification
The 3 months correlation between BRP and Lucid is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group 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 Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of BRP i.e., BRP and Lucid go up and down completely randomly.
Pair Corralation between BRP and Lucid
Given the investment horizon of 90 days BRP Inc is expected to generate 0.42 times more return on investment than Lucid. However, BRP Inc is 2.37 times less risky than Lucid. It trades about -0.03 of its potential returns per unit of risk. Lucid Group is currently generating about -0.03 per unit of risk. If you would invest 7,528 in BRP Inc on August 27, 2024 and sell it today you would lose (2,677) from holding BRP Inc or give up 35.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Lucid Group
Performance |
| Timeline |
| BRP Inc |
| Lucid Group |
BRP and Lucid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Lucid
The main advantage of trading using opposite BRP and Lucid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Lucid 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 Lucid will offset losses from the drop in Lucid's long position.The idea behind BRP Inc and Lucid Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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