Correlation Between Brunswick Corp and Polaris Industries

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

By analyzing existing cross correlation between Brunswick Corp and Polaris Industries, you can compare the effects of market volatilities on Brunswick Corp and Polaris Industries 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 Corp with a short position of Polaris Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick Corp and Polaris Industries.

Diversification Opportunities for Brunswick Corp and Polaris Industries

-0.08

Correlation Coefficient

Brunswick Corp  Polaris Industries

Good diversification

The 3 months correlation between Brunswick and Polaris is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick Corp and Polaris Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Industries and Brunswick Corp 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 Corp are associated (or correlated) with Polaris Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Industries has no effect on the direction of Brunswick Corp i.e., Brunswick Corp and Polaris Industries go up and down completely randomly.

Pair Corralation between Brunswick Corp and Polaris Industries

Assuming the 90 days horizon Brunswick Corp is expected to generate 0.22 times more return on investment than Polaris Industries. However, Brunswick Corp is 4.46 times less risky than Polaris Industries. It trades about 0.11 of its potential returns per unit of risk. Polaris Industries is currently generating about -0.12 per unit of risk. If you would invest  2,429  in Brunswick Corp on August 31, 2024 and sell it today you would earn a total of  89.00  from holding Brunswick Corp or generate 3.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Brunswick Corp  vs.  Polaris Industries

Brunswick Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brunswick Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Polaris Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polaris Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Brunswick Corp and Polaris Industries

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

The idea behind Brunswick Corp and Polaris Industries 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.