Correlation Between BRP and Lincoln National

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

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

Diversification Opportunities for BRP and Lincoln National

0.17

Correlation Coefficient

BRP  Lincoln National

Average diversification

The 3 months correlation between BRP and Lincoln is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National 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 Lincoln National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln National has no effect on the direction of BRP i.e., BRP and Lincoln National go up and down completely randomly.

Pair Corralation between BRP and Lincoln National

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Lincoln National. In addition to that, BRP is 2.86 times more volatile than Lincoln National. It trades about -0.03 of its total potential returns per unit of risk. Lincoln National is currently generating about 0.01 per unit of volatility. If you would invest  2,780  in Lincoln National on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Lincoln National or generate 0.07% return on investment over 90 days.

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

BRP Inc  vs.  Lincoln National

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 weak 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.

Lincoln National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lincoln National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lincoln National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BRP and Lincoln National

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

The idea behind BRP Inc and Lincoln National 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.