Correlation Between Enbridge and BRP

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

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

Diversification Opportunities for Enbridge and BRP

-0.76

Correlation Coefficient

Enbridge  BRP

Pay attention - limited upside

The 3 months correlation between Enbridge and BRP is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Enbridge 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 Enbridge 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 Enbridge i.e., Enbridge and BRP go up and down completely randomly.

Pair Corralation between Enbridge and BRP

Assuming the 90 days trading horizon Enbridge is expected to generate 3.16 times less return on investment than BRP. But when comparing it to its historical volatility, Enbridge is 3.29 times less risky than BRP. It trades about 0.21 of its potential returns per unit of risk. BRP Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,714  in BRP Inc on September 13, 2024 and sell it today you would earn a total of  758.00  from holding BRP Inc or generate 11.29% return on investment over 90 days.

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

Enbridge  vs.  BRP Inc

Enbridge

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Enbridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating 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.

Pair Trading with Enbridge and BRP

The main advantage of trading using opposite Enbridge and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge 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 Enbridge 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.