Correlation Between BRP and Wearable Devices

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

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

Diversification Opportunities for BRP and Wearable Devices

0.89

Correlation Coefficient

BRP  Wearable Devices

Very poor diversification

The 3 months correlation between BRP and Wearable is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices 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 Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of BRP i.e., BRP and Wearable Devices go up and down completely randomly.

Pair Corralation between BRP and Wearable Devices

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Wearable Devices. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 5.77 times less risky than Wearable Devices. The stock trades about -0.02 of its potential returns per unit of risk. The Wearable Devices is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Wearable Devices on September 24, 2024 and sell it today you would lose (755.00) from holding Wearable Devices or give up 80.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

BRP Inc  vs.  Wearable Devices

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Wearable Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wearable Devices 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 fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BRP and Wearable Devices

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

The idea behind BRP Inc and Wearable Devices 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.