Correlation Between TFI International and BRP

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

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

Diversification Opportunities for TFI International and BRP

-0.13

Correlation Coefficient

TFI International  BRP

Good diversification

The 3 months correlation between TFI and BRP is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and TFI International 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 TFI International 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 TFI International i.e., TFI International and BRP go up and down completely randomly.

Pair Corralation between TFI International and BRP

Assuming the 90 days trading horizon TFI International is expected to generate 0.88 times more return on investment than BRP. However, TFI International is 1.14 times less risky than BRP. It trades about 0.05 of its potential returns per unit of risk. BRP Inc is currently generating about -0.22 per unit of risk. If you would invest  19,774  in TFI International on August 31, 2024 and sell it today you would earn a total of  903.00  from holding TFI International or generate 4.57% return on investment over 90 days.

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

TFI International  vs.  BRP Inc

TFI International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFI International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TFI International is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with TFI International and BRP

The main advantage of trading using opposite TFI International and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFI International 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 TFI International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.