Correlation Between BRP and CDW Corp

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

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

Diversification Opportunities for BRP and CDW Corp

0.81

Correlation Coefficient

BRP  CDW Corp

Very poor diversification

The 3 months correlation between BRP and CDW is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp 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 CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of BRP i.e., BRP and CDW Corp go up and down completely randomly.

Pair Corralation between BRP and CDW Corp

Given the investment horizon of 90 days BRP Inc is expected to generate 1.62 times more return on investment than CDW Corp. However, BRP is 1.62 times more volatile than CDW Corp. It trades about 0.13 of its potential returns per unit of risk. CDW Corp is currently generating about -0.26 per unit of risk. If you would invest  4,905  in BRP Inc on September 12, 2024 and sell it today you would earn a total of  333.00  from holding BRP Inc or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

BRP Inc  vs.  CDW Corp

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 inconsistent 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.

CDW Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with BRP and CDW Corp

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

The idea behind BRP Inc and CDW Corp 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.