Correlation Between BRP and Vast Renewables
Can any of the company-specific risk be diversified away by investing in both BRP and Vast Renewables 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 Vast Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Vast Renewables Limited, you can compare the effects of market volatilities on BRP and Vast Renewables 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 Vast Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Vast Renewables.
Diversification Opportunities for BRP and Vast Renewables
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BRP and Vast is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables 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 Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of BRP i.e., BRP and Vast Renewables go up and down completely randomly.
Pair Corralation between BRP and Vast Renewables
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Vast Renewables. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 13.2 times less risky than Vast Renewables. The stock trades about -0.03 of its potential returns per unit of risk. The Vast Renewables Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Vast Renewables Limited on August 24, 2024 and sell it today you would lose (4.97) from holding Vast Renewables Limited or give up 45.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 35.28% |
| Values | Daily Returns |
BRP Inc vs. Vast Renewables Limited
Performance |
| Timeline |
| BRP Inc |
| Vast Renewables |
BRP and Vast Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Vast Renewables
The main advantage of trading using opposite BRP and Vast Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Vast Renewables 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 Vast Renewables will offset losses from the drop in Vast Renewables' long position.The idea behind BRP Inc and Vast Renewables Limited 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.| Vast Renewables vs. BRP Inc | Vast Renewables vs. Proficient Auto Logistics, | Vast Renewables vs. Sonos Inc | Vast Renewables vs. Old Dominion Freight |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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