Correlation Between BRP and Ferrari NV

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

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

Diversification Opportunities for BRP and Ferrari NV

0.22

Correlation Coefficient

BRP  Ferrari NV

Modest diversification

The 3 months correlation between BRP and Ferrari is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of BRP i.e., BRP and Ferrari NV go up and down completely randomly.

Pair Corralation between BRP and Ferrari NV

Given the investment horizon of 90 days BRP Inc is expected to generate 1.57 times more return on investment than Ferrari NV. However, BRP is 1.57 times more volatile than Ferrari NV. It trades about 0.23 of its potential returns per unit of risk. Ferrari NV is currently generating about -0.06 per unit of risk. If you would invest  3,320  in BRP Inc on May 6, 2025 and sell it today you would earn a total of  1,611  from holding BRP Inc or generate 48.52% return on investment over 90 days.

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

BRP Inc  vs.  Ferrari NV

BRP Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BRP Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, BRP displayed solid returns over the last few months and may actually be approaching a breakup point.

Ferrari NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BRP and Ferrari NV

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

The idea behind BRP Inc and Ferrari NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.