Correlation Between BRP and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both BRP and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Emerson Radio, you can compare the effects of market volatilities on BRP and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Emerson Radio.
Diversification Opportunities for BRP and Emerson Radio
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BRP and Emerson is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of BRP i.e., BRP and Emerson Radio go up and down completely randomly.
Pair Corralation between BRP and Emerson Radio
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Emerson Radio. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.67 times less risky than Emerson Radio. The stock trades about -0.27 of its potential returns per unit of risk. The Emerson Radio is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Emerson Radio on August 26, 2024 and sell it today you would lose (4.00) from holding Emerson Radio or give up 8.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Emerson Radio
Performance |
| Timeline |
| BRP Inc |
| Emerson Radio |
BRP and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Emerson Radio
The main advantage of trading using opposite BRP and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.The idea behind BRP Inc and Emerson Radio 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.| Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Vizio Holding Corp | Emerson Radio vs. Wearable Devices |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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