Correlation Between Brunswick and PACCAR
Can any of the company-specific risk be diversified away by investing in both Brunswick and PACCAR 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 Brunswick and PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brunswick and PACCAR Inc, you can compare the effects of market volatilities on Brunswick and PACCAR 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 Brunswick with a short position of PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and PACCAR.
Diversification Opportunities for Brunswick and PACCAR
Very weak diversification
The 3 months correlation between Brunswick and PACCAR is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and Brunswick 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 Brunswick are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Brunswick i.e., Brunswick and PACCAR go up and down completely randomly.
Pair Corralation between Brunswick and PACCAR
Allowing for the 90-day total investment horizon Brunswick is expected to generate 7.06 times less return on investment than PACCAR. But when comparing it to its historical volatility, Brunswick is 1.15 times less risky than PACCAR. It trades about 0.03 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 10,680 in PACCAR Inc on August 27, 2024 and sell it today you would earn a total of 974.00 from holding PACCAR Inc or generate 9.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brunswick vs. PACCAR Inc
Performance |
| Timeline |
| Brunswick |
| PACCAR Inc |
Brunswick and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brunswick and PACCAR
The main advantage of trading using opposite Brunswick and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| Brunswick vs. MCBC Holdings | Brunswick vs. Winnebago Industries | Brunswick vs. LCI Industries | Brunswick vs. Thor Industries |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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