Correlation Between Evil Empire and BRP

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

By analyzing existing cross correlation between Evil Empire Designs and BRP Inc, you can compare the effects of market volatilities on Evil Empire 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 Evil Empire with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evil Empire and BRP.

Diversification Opportunities for Evil Empire and BRP

-0.17

Correlation Coefficient

Evil Empire  BRP

Good diversification

The 3 months correlation between Evil and BRP is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Evil Empire Designs and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Evil Empire 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 Evil Empire Designs 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 Inc has no effect on the direction of Evil Empire i.e., Evil Empire and BRP go up and down completely randomly.

Pair Corralation between Evil Empire and BRP

Given the investment horizon of 90 days Evil Empire Designs is expected to under-perform the BRP. In addition to that, Evil Empire is 5.36 times more volatile than BRP Inc. It trades about -0.23 of its total potential returns per unit of risk. BRP Inc is currently generating about 0.03 per unit of volatility. If you would invest  5,162  in BRP Inc on October 20, 2024 and sell it today you would earn a total of  37.00  from holding BRP Inc or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Evil Empire Designs  vs.  BRP Inc

Evil Empire Designs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evil Empire Designs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 very healthy basic indicators, BRP is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Evil Empire and BRP

The main advantage of trading using opposite Evil Empire and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evil Empire 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 Evil Empire Designs and BRP Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.