Correlation Between BRP and Freedom Bank

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

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

Diversification Opportunities for BRP and Freedom Bank

0.04

Correlation Coefficient

BRP  Freedom Bank

Significant diversification

The 3 months correlation between BRP and Freedom is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of BRP i.e., BRP and Freedom Bank go up and down completely randomly.

Pair Corralation between BRP and Freedom Bank

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Freedom Bank. In addition to that, BRP is 3.45 times more volatile than Freedom Bank of. It trades about -0.15 of its total potential returns per unit of risk. Freedom Bank of is currently generating about -0.14 per unit of volatility. If you would invest  1,061  in Freedom Bank of on December 26, 2024 and sell it today you would lose (71.00) from holding Freedom Bank of or give up 6.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

BRP Inc  vs.  Freedom Bank of

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.

Freedom Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BRP and Freedom Bank

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

The idea behind BRP Inc and Freedom Bank of 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.