Correlation Between BRP and MF International

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

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

Diversification Opportunities for BRP and MF International

0.1

Correlation Coefficient

BRP  MF International

Average diversification

The 3 months correlation between BRP and MFI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and mF International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mF International 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 MF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mF International has no effect on the direction of BRP i.e., BRP and MF International go up and down completely randomly.

Pair Corralation between BRP and MF International

Given the investment horizon of 90 days BRP Inc is expected to under-perform the MF International. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 3.03 times less risky than MF International. The stock trades about -0.12 of its potential returns per unit of risk. The mF International Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  91.00  in mF International Limited on September 17, 2024 and sell it today you would lose (16.00) from holding mF International Limited or give up 17.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BRP Inc  vs.  mF International 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 weak 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.

mF International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days mF International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, MF International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BRP and MF International

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

The idea behind BRP Inc and mF International 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.

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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 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.