Correlation Between Forza X1 and BRP

Can any of the company-specific risk be diversified away by investing in both Forza X1 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 Forza X1 and BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Forza X1 and BRP Inc, you can compare the effects of market volatilities on Forza X1 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 Forza X1 with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forza X1 and BRP.

Diversification Opportunities for Forza X1 and BRP

0.29

Correlation Coefficient

Forza X1  BRP

Modest diversification

The 3 months correlation between Forza and BRP is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Forza X1 and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Forza X1 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 Forza X1 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 Forza X1 i.e., Forza X1 and BRP go up and down completely randomly.

Pair Corralation between Forza X1 and BRP

Given the investment horizon of 90 days Forza X1 is expected to generate 2.93 times more return on investment than BRP. However, Forza X1 is 2.93 times more volatile than BRP Inc. It trades about -0.03 of its potential returns per unit of risk. BRP Inc is currently generating about -0.12 per unit of risk. If you would invest  45.00  in Forza X1 on March 22, 2024 and sell it today you would lose (5.10) from holding Forza X1 or give up 11.33% of portfolio value over 90 days.

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

Forza X1  vs.  BRP Inc

Forza X1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forza X1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company 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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Forza X1 and BRP

The main advantage of trading using opposite Forza X1 and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forza X1 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 Forza X1 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.