Correlation Between BRP and Afterpay

Can any of the company-specific risk be diversified away by investing in both BRP and Afterpay 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 Afterpay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRP Inc and Afterpay Limited, you can compare the effects of market volatilities on BRP and Afterpay 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 Afterpay. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Afterpay.

Diversification Opportunities for BRP and Afterpay

0.0

Correlation Coefficient

BRP  Afterpay

Pay attention - limited upside

The 3 months correlation between BRP and Afterpay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Afterpay Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afterpay Limited 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 Afterpay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afterpay Limited has no effect on the direction of BRP i.e., BRP and Afterpay go up and down completely randomly.

Pair Corralation between BRP and Afterpay

If you would invest (100.00) in Afterpay Limited on September 29, 2024 and sell it today you would earn a total of  100.00  from holding Afterpay Limited or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

BRP Inc  vs.  Afterpay Limited

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Afterpay Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afterpay Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Afterpay is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BRP and Afterpay

The main advantage of trading using opposite BRP and Afterpay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Afterpay 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 Afterpay will offset losses from the drop in Afterpay's long position.

The idea behind BRP Inc and Afterpay 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.