Correlation Between BRP and On Holding
Can any of the company-specific risk be diversified away by investing in both BRP and On Holding 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 On Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and On Holding, you can compare the effects of market volatilities on BRP and On Holding 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 On Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and On Holding.
Diversification Opportunities for BRP and On Holding
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BRP and ONON is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and On Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On Holding 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 On Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On Holding has no effect on the direction of BRP i.e., BRP and On Holding go up and down completely randomly.
Pair Corralation between BRP and On Holding
Given the investment horizon of 90 days BRP Inc is expected to under-perform the On Holding. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.86 times less risky than On Holding. The stock trades about -0.18 of its potential returns per unit of risk. The On Holding is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 4,738 in On Holding on August 24, 2024 and sell it today you would earn a total of 881.00 from holding On Holding or generate 18.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. On Holding
Performance |
| Timeline |
| BRP Inc |
| On Holding |
BRP and On Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and On Holding
The main advantage of trading using opposite BRP and On Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, On Holding 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 On Holding will offset losses from the drop in On Holding's long position.The idea behind BRP Inc and On Holding 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.| On Holding vs. Crocs Inc | On Holding vs. Skechers USA | On Holding vs. Nike Inc | On Holding vs. Designer Brands |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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