Correlation Between Brunswick and Forza X1

Can any of the company-specific risk be diversified away by investing in both Brunswick and Forza X1 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 Forza X1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brunswick and Forza X1, you can compare the effects of market volatilities on Brunswick and Forza X1 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 Forza X1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and Forza X1.

Diversification Opportunities for Brunswick and Forza X1

-0.38

Correlation Coefficient

Brunswick  Forza X1

Very good diversification

The 3 months correlation between Brunswick and Forza is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Forza X1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forza X1 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 Forza X1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forza X1 has no effect on the direction of Brunswick i.e., Brunswick and Forza X1 go up and down completely randomly.

Pair Corralation between Brunswick and Forza X1

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Forza X1. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 4.91 times less risky than Forza X1. The stock trades about -0.01 of its potential returns per unit of risk. The Forza X1 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Forza X1 on August 23, 2024 and sell it today you would lose (1.00) from holding Forza X1 or give up 4.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.81%
Values	Daily Returns

Brunswick  vs.  Forza X1

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Forza X1

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Forza X1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating basic indicators, Forza X1 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brunswick and Forza X1

The main advantage of trading using opposite Brunswick and Forza X1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick position performs unexpectedly, Forza X1 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 Forza X1 will offset losses from the drop in Forza X1's long position.

The idea behind Brunswick and Forza X1 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.