Correlation Between BRP and VF
Can any of the company-specific risk be diversified away by investing in both BRP and VF 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 VF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and VF Corporation, you can compare the effects of market volatilities on BRP and VF 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 VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and VF.
Diversification Opportunities for BRP and VF
Very good diversification
The 3 months correlation between BRP and VF is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corporation 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of BRP i.e., BRP and VF go up and down completely randomly.
Pair Corralation between BRP and VF
Given the investment horizon of 90 days BRP Inc is expected to generate 0.82 times more return on investment than VF. However, BRP Inc is 1.21 times less risky than VF. It trades about -0.11 of its potential returns per unit of risk. VF Corporation is currently generating about -0.14 per unit of risk. If you would invest 5,127 in BRP Inc on August 31, 2024 and sell it today you would lose (289.00) from holding BRP Inc or give up 5.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. VF Corp.
Performance |
| Timeline |
| BRP Inc |
| VF Corporation |
BRP and VF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and VF
The main advantage of trading using opposite BRP and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, VF 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 VF will offset losses from the drop in VF's long position.The idea behind BRP Inc and VF Corporation 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.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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