Correlation Between BRP and Barings BDC

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

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

Diversification Opportunities for BRP and Barings BDC

-0.33

Correlation Coefficient

BRP  Barings BDC

Very good diversification

The 3 months correlation between BRP and Barings is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC and BRP 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 BRP Inc are associated (or correlated) with Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of BRP i.e., BRP and Barings BDC go up and down completely randomly.

Pair Corralation between BRP and Barings BDC

Given the investment horizon of 90 days BRP Inc is expected to generate 3.34 times more return on investment than Barings BDC. However, BRP is 3.34 times more volatile than Barings BDC. It trades about 0.14 of its potential returns per unit of risk. Barings BDC is currently generating about 0.01 per unit of risk. 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

BRP Inc  vs.  Barings BDC

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.

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.

Pair Trading with BRP and Barings BDC

The main advantage of trading using opposite BRP and Barings BDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Barings BDC 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 Barings BDC will offset losses from the drop in Barings BDC's long position.

The idea behind BRP Inc and Barings BDC 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.