Correlation Between BRP and Vulcan Materials

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

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

Diversification Opportunities for BRP and Vulcan Materials

-0.79

Correlation Coefficient

BRP  Vulcan Materials

Pay attention - limited upside

The 3 months correlation between BRP and Vulcan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of BRP i.e., BRP and Vulcan Materials go up and down completely randomly.

Pair Corralation between BRP and Vulcan Materials

Given the investment horizon of 90 days BRP Inc is expected to generate 1.79 times more return on investment than Vulcan Materials. However, BRP is 1.79 times more volatile than Vulcan Materials. It trades about -0.02 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.5 per unit of risk. If you would invest  5,324  in BRP Inc on October 9, 2024 and sell it today you would lose (55.00) from holding BRP Inc or give up 1.03% of portfolio value over 90 days.

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

BRP Inc  vs.  Vulcan Materials

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.

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with BRP and Vulcan Materials

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

The idea behind BRP Inc and Vulcan Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.