Correlation Between Brunswick Corp and Ree Automotive

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

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

Diversification Opportunities for Brunswick Corp and Ree Automotive

0.69

Correlation Coefficient

Brunswick Corp  Ree Automotive

Poor diversification

The 3 months correlation between Brunswick and Ree is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick Corp and Ree Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ree Automotive Holding 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 Ree Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ree Automotive Holding has no effect on the direction of Brunswick Corp i.e., Brunswick Corp and Ree Automotive go up and down completely randomly.

Pair Corralation between Brunswick Corp and Ree Automotive

Assuming the 90 days horizon Brunswick Corp is expected to generate 24.79 times less return on investment than Ree Automotive. But when comparing it to its historical volatility, Brunswick Corp is 13.78 times less risky than Ree Automotive. It trades about 0.05 of its potential returns per unit of risk. Ree Automotive Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  437.00  in Ree Automotive Holding on August 31, 2024 and sell it today you would earn a total of  336.00  from holding Ree Automotive Holding or generate 76.89% return on investment over 90 days.

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

Brunswick Corp  vs.  Ree Automotive Holding

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.

Ree Automotive Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ree Automotive Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Ree Automotive exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brunswick Corp and Ree Automotive

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

The idea behind Brunswick Corp and Ree Automotive Holding 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.