Correlation Between CHEVRON CDR and BRP

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

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

Diversification Opportunities for CHEVRON CDR and BRP

-0.74

Correlation Coefficient

CHEVRON CDR  BRP

Pay attention - limited upside

The 3 months correlation between CHEVRON and BRP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON CDR and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and CHEVRON CDR 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 CHEVRON CDR 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 CHEVRON CDR i.e., CHEVRON CDR and BRP go up and down completely randomly.

Pair Corralation between CHEVRON CDR and BRP

Assuming the 90 days trading horizon CHEVRON CDR is expected to generate 0.5 times more return on investment than BRP. However, CHEVRON CDR is 2.01 times less risky than BRP. It trades about 0.18 of its potential returns per unit of risk. BRP Inc is currently generating about -0.21 per unit of risk. If you would invest  1,923  in CHEVRON CDR on September 3, 2024 and sell it today you would earn a total of  264.00  from holding CHEVRON CDR or generate 13.73% return on investment over 90 days.

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

CHEVRON CDR  vs.  BRP Inc

CHEVRON CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, CHEVRON CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CHEVRON CDR and BRP

The main advantage of trading using opposite CHEVRON CDR and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEVRON CDR 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 CHEVRON CDR 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.