Correlation Between BRP and NetEase
Can any of the company-specific risk be diversified away by investing in both BRP and NetEase 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 NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and NetEase, you can compare the effects of market volatilities on BRP and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and NetEase.
Diversification Opportunities for BRP and NetEase
Very weak diversification
The 3 months correlation between BRP and NetEase is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of BRP i.e., BRP and NetEase go up and down completely randomly.
Pair Corralation between BRP and NetEase
Given the investment horizon of 90 days BRP Inc is expected to under-perform the NetEase. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.14 times less risky than NetEase. The stock trades about -0.09 of its potential returns per unit of risk. The NetEase is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 8,776 in NetEase on November 3, 2024 and sell it today you would earn a total of 1,509 from holding NetEase or generate 17.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
BRP Inc vs. NetEase
Performance |
| Timeline |
| BRP Inc |
| NetEase |
BRP and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and NetEase
The main advantage of trading using opposite BRP and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.The idea behind BRP Inc and NetEase 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.| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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