Correlation Between BRP and NH Foods
Can any of the company-specific risk be diversified away by investing in both BRP and NH Foods 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 NH Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and NH Foods Ltd, you can compare the effects of market volatilities on BRP and NH Foods 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 NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and NH Foods.
Diversification Opportunities for BRP and NH Foods
Pay attention - limited upside
The 3 months correlation between BRP and NIPMY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of BRP i.e., BRP and NH Foods go up and down completely randomly.
Pair Corralation between BRP and NH Foods
Given the investment horizon of 90 days BRP Inc is expected to under-perform the NH Foods. In addition to that, BRP is 4.45 times more volatile than NH Foods Ltd. It trades about -0.05 of its total potential returns per unit of risk. NH Foods Ltd is currently generating about 0.08 per unit of volatility. If you would invest 1,510 in NH Foods Ltd on September 1, 2024 and sell it today you would earn a total of 190.00 from holding NH Foods Ltd or generate 12.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. NH Foods Ltd
Performance |
| Timeline |
| BRP Inc |
| NH Foods |
BRP and NH Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and NH Foods
The main advantage of trading using opposite BRP and NH Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, NH Foods 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 NH Foods will offset losses from the drop in NH Foods' long position.The idea behind BRP Inc and NH Foods Ltd 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.| NH Foods vs. The A2 Milk | NH Foods vs. Altavoz Entertainment | NH Foods vs. Artisan Consumer Goods | NH Foods vs. General Mills |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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