Correlation Between Ree Automotive and BRP

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

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

Diversification Opportunities for Ree Automotive and BRP

0.84

Correlation Coefficient

Ree Automotive  BRP

Very poor diversification

The 3 months correlation between Ree and BRP is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ree Automotive Holding and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Ree Automotive 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 Ree Automotive Holding 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 Ree Automotive i.e., Ree Automotive and BRP go up and down completely randomly.

Pair Corralation between Ree Automotive and BRP

Considering the 90-day investment horizon Ree Automotive Holding is expected to under-perform the BRP. In addition to that, Ree Automotive is 2.36 times more volatile than BRP Inc. It trades about -0.19 of its total potential returns per unit of risk. BRP Inc is currently generating about -0.21 per unit of volatility. If you would invest  5,040  in BRP Inc on December 26, 2024 and sell it today you would lose (1,486) from holding BRP Inc or give up 29.48% of portfolio value over 90 days.

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

Ree Automotive Holding  vs.  BRP Inc

Ree Automotive Holding

Risk-Adjusted Performance

Very Weak

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

BRP Inc

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ree Automotive and BRP

The main advantage of trading using opposite Ree Automotive and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ree Automotive 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 Ree Automotive Holding 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.