Correlation Between BRP and Carters

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

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

Diversification Opportunities for BRP and Carters

0.73

Correlation Coefficient

BRP  Carters

Poor diversification

The 3 months correlation between BRP and Carters is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of BRP i.e., BRP and Carters go up and down completely randomly.

Pair Corralation between BRP and Carters

Given the investment horizon of 90 days BRP Inc is expected to generate 0.95 times more return on investment than Carters. However, BRP Inc is 1.05 times less risky than Carters. It trades about -0.06 of its potential returns per unit of risk. Carters is currently generating about -0.15 per unit of risk. If you would invest  5,260  in BRP Inc on October 12, 2024 and sell it today you would lose (151.00) from holding BRP Inc or give up 2.87% of portfolio value over 90 days.

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

BRP Inc  vs.  Carters

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with BRP and Carters

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

The idea behind BRP Inc and Carters 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.