Correlation Between BRP and Polaris Industries

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

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

Diversification Opportunities for BRP and Polaris Industries

-0.1

Correlation Coefficient

BRP  Polaris Industries

Good diversification

The 3 months correlation between BRP and Polaris is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and BRP 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 BRP Inc are associated (or correlated) with Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of BRP i.e., BRP and Polaris Industries go up and down completely randomly.

Pair Corralation between BRP and Polaris Industries

Given the investment horizon of 90 days BRP Inc is expected to generate 1.26 times more return on investment than Polaris Industries. However, BRP is 1.26 times more volatile than Polaris Industries. It trades about 0.03 of its potential returns per unit of risk. Polaris Industries is currently generating about -0.08 per unit of risk. If you would invest  6,666  in BRP Inc on February 19, 2024 and sell it today you would earn a total of  174.00  from holding BRP Inc or generate 2.61% return on investment over 90 days.

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

BRP Inc  vs.  Polaris Industries

BRP Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BRP Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BRP is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Polaris Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BRP and Polaris Industries

The main advantage of trading using opposite BRP and Polaris Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Polaris Industries 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 Polaris Industries will offset losses from the drop in Polaris Industries' long position.

The idea behind BRP Inc and Polaris Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.