Correlation Between VOXX International and BRP

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

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

Diversification Opportunities for VOXX International and BRP

-0.01

Correlation Coefficient

VOXX International  BRP

Good diversification

The 3 months correlation between VOXX and BRP is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding VOXX International and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and VOXX International 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 VOXX International 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 VOXX International i.e., VOXX International and BRP go up and down completely randomly.

Pair Corralation between VOXX International and BRP

Given the investment horizon of 90 days VOXX International is expected to under-perform the BRP. But the stock apears to be less risky and, when comparing its historical volatility, VOXX International is 1.3 times less risky than BRP. The stock trades about -0.23 of its potential returns per unit of risk. The BRP Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,340  in BRP Inc on January 20, 2024 and sell it today you would earn a total of  466.00  from holding BRP Inc or generate 7.35% return on investment over 90 days.

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

VOXX International  vs.  BRP Inc

VOXX International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOXX International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VOXX International and BRP

The main advantage of trading using opposite VOXX International and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VOXX International 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 VOXX International 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.