Correlation Between Lincoln National and BRP

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

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

Diversification Opportunities for Lincoln National and BRP

0.11

Correlation Coefficient

Lincoln National  BRP

Average diversification

The 3 months correlation between Lincoln and BRP is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Lincoln National 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 Lincoln National 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 Lincoln National i.e., Lincoln National and BRP go up and down completely randomly.

Pair Corralation between Lincoln National and BRP

Assuming the 90 days trading horizon Lincoln National is expected to under-perform the BRP. But the preferred stock apears to be less risky and, when comparing its historical volatility, Lincoln National is 2.23 times less risky than BRP. The preferred stock trades about -0.06 of its potential returns per unit of risk. The BRP Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,063  in BRP Inc on October 23, 2024 and sell it today you would earn a total of  264.00  from holding BRP Inc or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Lincoln National  vs.  BRP Inc

Lincoln National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lincoln National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lincoln National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BRP Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BRP Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Lincoln National and BRP

The main advantage of trading using opposite Lincoln National and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National 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 Lincoln National 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.