Correlation Between LENSAR and BRP
Can any of the company-specific risk be diversified away by investing in both LENSAR and BRP 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 LENSAR and BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and BRP Inc, you can compare the effects of market volatilities on LENSAR and BRP 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 LENSAR with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and BRP.
Diversification Opportunities for LENSAR and BRP
Pay attention - limited upside
The 3 months correlation between LENSAR and BRP is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and LENSAR 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 LENSAR Inc are associated (or correlated) with BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of LENSAR i.e., LENSAR and BRP go up and down completely randomly.
Pair Corralation between LENSAR and BRP
Given the investment horizon of 90 days LENSAR Inc is expected to generate 3.7 times more return on investment than BRP. However, LENSAR is 3.7 times more volatile than BRP Inc. It trades about 0.28 of its potential returns per unit of risk. BRP Inc is currently generating about -0.21 per unit of risk. If you would invest 560.00 in LENSAR Inc on August 27, 2024 and sell it today you would earn a total of 178.00 from holding LENSAR Inc or generate 31.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. BRP Inc
Performance |
| Timeline |
| LENSAR Inc |
| BRP Inc |
LENSAR and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and BRP
The main advantage of trading using opposite LENSAR and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.The idea behind LENSAR Inc and BRP Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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