Correlation Between BRP and FEDEX

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

By analyzing existing cross correlation between BRP Inc and FEDEX P 42, you can compare the effects of market volatilities on BRP and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and FEDEX.

Diversification Opportunities for BRP and FEDEX

0.49

Correlation Coefficient

BRP  FEDEX

Very weak diversification

The 3 months correlation between BRP and FEDEX is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and FEDEX P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 42 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 42 has no effect on the direction of BRP i.e., BRP and FEDEX go up and down completely randomly.

Pair Corralation between BRP and FEDEX

Given the investment horizon of 90 days BRP Inc is expected to under-perform the FEDEX. In addition to that, BRP is 3.83 times more volatile than FEDEX P 42. It trades about -0.07 of its total potential returns per unit of risk. FEDEX P 42 is currently generating about -0.02 per unit of volatility. If you would invest  9,963  in FEDEX P 42 on October 9, 2024 and sell it today you would lose (64.00) from holding FEDEX P 42 or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

BRP Inc  vs.  FEDEX P 42

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.

FEDEX P 42

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BRP and FEDEX

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

The idea behind BRP Inc and FEDEX P 42 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.