Correlation Between BRP and Ubisoft Entertainment

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

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

Diversification Opportunities for BRP and Ubisoft Entertainment

0.32

Correlation Coefficient

BRP  Ubisoft Entertainment

Weak diversification

The 3 months correlation between BRP and Ubisoft is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of BRP i.e., BRP and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between BRP and Ubisoft Entertainment

Given the investment horizon of 90 days BRP Inc is expected to under-perform the Ubisoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.67 times less risky than Ubisoft Entertainment. The stock trades about -0.02 of its potential returns per unit of risk. The Ubisoft Entertainment is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,086  in Ubisoft Entertainment on October 10, 2024 and sell it today you would lose (752.00) from holding Ubisoft Entertainment or give up 36.05% of portfolio value over 90 days.

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

BRP Inc  vs.  Ubisoft Entertainment

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.

Ubisoft Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubisoft Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ubisoft Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BRP and Ubisoft Entertainment

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

The idea behind BRP Inc and Ubisoft Entertainment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.