Correlation Between BRP and CTS

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

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

Diversification Opportunities for BRP and CTS

-0.71

Correlation Coefficient

BRP  CTS

Pay attention - limited upside

The 3 months correlation between BRP and CTS is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and CTS Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Corporation 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 CTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Corporation has no effect on the direction of BRP i.e., BRP and CTS go up and down completely randomly.

Pair Corralation between BRP and CTS

Given the investment horizon of 90 days BRP Inc is expected to under-perform the CTS. In addition to that, BRP is 1.11 times more volatile than CTS Corporation. It trades about -0.02 of its total potential returns per unit of risk. CTS Corporation is currently generating about 0.04 per unit of volatility. If you would invest  3,987  in CTS Corporation on September 24, 2024 and sell it today you would earn a total of  1,233  from holding CTS Corporation or generate 30.93% return on investment over 90 days.

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

BRP Inc  vs.  CTS Corp.

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.

CTS Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BRP and CTS

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

The idea behind BRP Inc and CTS Corporation 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.