Correlation Between BRP and AutoZone

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

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

Diversification Opportunities for BRP and AutoZone

-0.14

Correlation Coefficient

BRP  AutoZone

Good diversification

The 3 months correlation between BRP and AutoZone is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of BRP i.e., BRP and AutoZone go up and down completely randomly.

Pair Corralation between BRP and AutoZone

Given the investment horizon of 90 days BRP is expected to generate 2.63 times less return on investment than AutoZone. In addition to that, BRP is 1.73 times more volatile than AutoZone. It trades about 0.01 of its total potential returns per unit of risk. AutoZone is currently generating about 0.06 per unit of volatility. If you would invest  209,235  in AutoZone on January 29, 2024 and sell it today you would earn a total of  85,363  from holding AutoZone or generate 40.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

BRP Inc  vs.  AutoZone

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 newest stock price disarray, may contribute to short-term losses for the investors.

AutoZone

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AutoZone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BRP and AutoZone

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

The idea behind BRP Inc and AutoZone 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.