Correlation Between Critical Metals and BRP

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

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

Diversification Opportunities for Critical Metals and BRP

0.86

Correlation Coefficient

Critical Metals  BRP

Very poor diversification

The 3 months correlation between Critical and BRP is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Critical Metals Corp and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Critical Metals 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 Critical Metals Corp 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 Critical Metals i.e., Critical Metals and BRP go up and down completely randomly.

Pair Corralation between Critical Metals and BRP

Given the investment horizon of 90 days Critical Metals Corp is expected to under-perform the BRP. In addition to that, Critical Metals is 4.36 times more volatile than BRP Inc. It trades about -0.14 of its total potential returns per unit of risk. BRP Inc is currently generating about -0.2 per unit of volatility. If you would invest  5,244  in BRP Inc on December 20, 2024 and sell it today you would lose (1,371) from holding BRP Inc or give up 26.14% of portfolio value over 90 days.

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

Critical Metals Corp  vs.  BRP Inc

Critical Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Critical Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BRP Inc

Risk-Adjusted Performance

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

Pair Trading with Critical Metals and BRP

The main advantage of trading using opposite Critical Metals and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Critical Metals 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 Critical Metals Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.