Correlation Between Barings BDC and BRP

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

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

Diversification Opportunities for Barings BDC and BRP

-0.33

Correlation Coefficient

Barings BDC  BRP

Very good diversification

The 3 months correlation between Barings and BRP is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and BRP go up and down completely randomly.

Pair Corralation between Barings BDC and BRP

Given the investment horizon of 90 days Barings BDC is expected to generate 48.6 times less return on investment than BRP. But when comparing it to its historical volatility, Barings BDC is 3.34 times less risky than BRP. It trades about 0.01 of its potential returns per unit of risk. BRP Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,809  in BRP Inc on September 16, 2024 and sell it today you would earn a total of  362.00  from holding BRP Inc or generate 7.53% return on investment over 90 days.

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

Barings BDC  vs.  BRP Inc

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Barings BDC and BRP

The main advantage of trading using opposite Barings BDC and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.