Correlation Between Willamette Valley and BRP

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

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

Diversification Opportunities for Willamette Valley and BRP

0.74

Correlation Coefficient

Willamette Valley  BRP

Poor diversification

The 3 months correlation between Willamette and BRP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and BRP go up and down completely randomly.

Pair Corralation between Willamette Valley and BRP

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the BRP. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 1.19 times less risky than BRP. The stock trades about -0.06 of its potential returns per unit of risk. The BRP Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,406  in BRP Inc on September 18, 2024 and sell it today you would lose (2,331) from holding BRP Inc or give up 31.47% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  BRP Inc

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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

Pair Trading with Willamette Valley and BRP

The main advantage of trading using opposite Willamette Valley and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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.