Correlation Between Sea and Brunswick
Can any of the company-specific risk be diversified away by investing in both Sea and Brunswick 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 Sea and Brunswick into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Brunswick, you can compare the effects of market volatilities on Sea and Brunswick 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 Sea with a short position of Brunswick. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Brunswick.
Diversification Opportunities for Sea and Brunswick
Very weak diversification
The 3 months correlation between Sea and Brunswick is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Sea 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 Sea are associated (or correlated) with Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of Sea i.e., Sea and Brunswick go up and down completely randomly.
Pair Corralation between Sea and Brunswick
Allowing for the 90-day total investment horizon Sea is expected to generate 1.35 times more return on investment than Brunswick. However, Sea is 1.35 times more volatile than Brunswick. It trades about 0.13 of its potential returns per unit of risk. Brunswick is currently generating about 0.03 per unit of risk. If you would invest 4,447 in Sea on September 1, 2024 and sell it today you would earn a total of 6,933 from holding Sea or generate 155.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. Brunswick
Performance |
| Timeline |
| Sea |
| Brunswick |
Sea and Brunswick Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Brunswick
The main advantage of trading using opposite Sea and Brunswick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, Brunswick 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 Brunswick will offset losses from the drop in Brunswick's long position.The idea behind Sea and Brunswick 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.| Brunswick vs. LCI Industries | Brunswick vs. MCBC Holdings | Brunswick vs. Winnebago 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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