Correlation Between Erie Indemnity and Brp

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

By analyzing existing cross correlation between Erie Indemnity and Brp Group, you can compare the effects of market volatilities on Erie Indemnity and Brp 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 Erie Indemnity with a short position of Brp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Brp.

Diversification Opportunities for Erie Indemnity and Brp

0.27

Correlation Coefficient

Erie Indemnity  Brp

Modest diversification

The 3 months correlation between Erie and Brp is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Brp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brp Group and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Brp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brp Group has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Brp go up and down completely randomly.

Pair Corralation between Erie Indemnity and Brp

If you would invest  36,442  in Erie Indemnity on September 30, 2024 and sell it today you would earn a total of  5,490  from holding Erie Indemnity or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.79%
Values	Daily Returns

Erie Indemnity  vs.  Brp Group

Erie Indemnity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erie Indemnity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Brp Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brp Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Brp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Erie Indemnity and Brp

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

The idea behind Erie Indemnity and Brp Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.