Correlation Between LCI Industries and BRP
Can any of the company-specific risk be diversified away by investing in both LCI Industries 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 LCI Industries and BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LCI Industries and BRP Inc, you can compare the effects of market volatilities on LCI Industries 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 LCI Industries with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of LCI Industries and BRP.
Diversification Opportunities for LCI Industries and BRP
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between LCI and BRP is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding LCI Industries and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and LCI Industries 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 LCI Industries 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 LCI Industries i.e., LCI Industries and BRP go up and down completely randomly.
Pair Corralation between LCI Industries and BRP
Given the investment horizon of 90 days LCI Industries is expected to under-perform the BRP. But the stock apears to be less risky and, when comparing its historical volatility, LCI Industries is 1.17 times less risky than BRP. The stock trades about -0.13 of its potential returns per unit of risk. The BRP Inc is currently generating about 0.16 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 598.00 from holding BRP Inc or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LCI Industries vs. BRP Inc
Performance |
| Timeline |
| LCI Industries |
| BRP Inc |
LCI Industries and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LCI Industries and BRP
The main advantage of trading using opposite LCI Industries and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LCI Industries 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.| LCI Industries vs. Microvast Holdings | LCI Industries vs. EVgo Equity Warrants | LCI Industries vs. Xos Inc | LCI Industries vs. AEye Inc |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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