Correlation Between Brunswick and Teleflex Incorporated

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Can any of the company-specific risk be diversified away by investing in both Brunswick and Teleflex Incorporated 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 Teleflex Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brunswick and Teleflex Incorporated, you can compare the effects of market volatilities on Brunswick and Teleflex Incorporated 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 Teleflex Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and Teleflex Incorporated.

Diversification Opportunities for Brunswick and Teleflex Incorporated

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brunswick and Teleflex is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Teleflex Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleflex Incorporated 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 Teleflex Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleflex Incorporated has no effect on the direction of Brunswick i.e., Brunswick and Teleflex Incorporated go up and down completely randomly.

Pair Corralation between Brunswick and Teleflex Incorporated

Allowing for the 90-day total investment horizon Brunswick is expected to generate 0.85 times more return on investment than Teleflex Incorporated. However, Brunswick is 1.18 times less risky than Teleflex Incorporated. It trades about -0.2 of its potential returns per unit of risk. Teleflex Incorporated is currently generating about -0.21 per unit of risk. If you would invest  8,338  in Brunswick on September 29, 2024 and sell it today you would lose (1,868) from holding Brunswick or give up 22.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brunswick  vs.  Teleflex Incorporated

 Performance 
       Timeline  
Brunswick 

Risk-Adjusted Performance

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Weak
 
Strong
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 uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Teleflex Incorporated 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Teleflex Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Brunswick and Teleflex Incorporated Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brunswick and Teleflex Incorporated

The main advantage of trading using opposite Brunswick and Teleflex Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick position performs unexpectedly, Teleflex Incorporated 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 Teleflex Incorporated will offset losses from the drop in Teleflex Incorporated's long position.
The idea behind Brunswick and Teleflex Incorporated 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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