Correlation Between BRP and Universal Electronics
Can any of the company-specific risk be diversified away by investing in both BRP and Universal Electronics 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 Universal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Universal Electronics, you can compare the effects of market volatilities on BRP and Universal Electronics 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 Universal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Universal Electronics.
Diversification Opportunities for BRP and Universal Electronics
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BRP and Universal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics 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 Universal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of BRP i.e., BRP and Universal Electronics go up and down completely randomly.
Pair Corralation between BRP and Universal Electronics
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Universal Electronics. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 3.2 times less risky than Universal Electronics. The stock trades about -0.11 of its potential returns per unit of risk. The Universal Electronics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 882.00 in Universal Electronics on August 31, 2024 and sell it today you would earn a total of 262.00 from holding Universal Electronics or generate 29.71% 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. Universal Electronics
Performance |
| Timeline |
| BRP Inc |
| Universal Electronics |
BRP and Universal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Universal Electronics
The main advantage of trading using opposite BRP and Universal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Universal Electronics 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 Universal Electronics will offset losses from the drop in Universal Electronics' long position.The idea behind BRP Inc and Universal Electronics 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.| Universal Electronics vs. LG Display Co | Universal Electronics vs. Vizio Holding Corp | Universal Electronics vs. Zepp Health Corp | Universal Electronics vs. Sonos Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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