Correlation Between VersaBank and BRP

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

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

Diversification Opportunities for VersaBank and BRP

-0.64

Correlation Coefficient

VersaBank  BRP

Excellent diversification

The 3 months correlation between VersaBank and BRP is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and VersaBank 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 VersaBank 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 VersaBank i.e., VersaBank and BRP go up and down completely randomly.

Pair Corralation between VersaBank and BRP

Assuming the 90 days trading horizon VersaBank is expected to under-perform the BRP. In addition to that, VersaBank is 1.57 times more volatile than BRP Inc. It trades about -0.17 of its total potential returns per unit of risk. BRP Inc is currently generating about 0.0 per unit of volatility. If you would invest  7,563  in BRP Inc on October 9, 2024 and sell it today you would lose (34.00) from holding BRP Inc or give up 0.45% of portfolio value over 90 days.

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

VersaBank  vs.  BRP Inc

VersaBank

Risk-Adjusted Performance

5 of 100

Modest

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

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VersaBank and BRP

The main advantage of trading using opposite VersaBank and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank 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 VersaBank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.