Correlation Between Brunswick and VHAI

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

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

Diversification Opportunities for Brunswick and VHAI

0.28

Correlation Coefficient

Brunswick  VHAI

Modest diversification

The 3 months correlation between Brunswick and VHAI is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and VHAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VHAI 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 VHAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VHAI has no effect on the direction of Brunswick i.e., Brunswick and VHAI go up and down completely randomly.

Pair Corralation between Brunswick and VHAI

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the VHAI. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 6.12 times less risky than VHAI. The stock trades about -0.18 of its potential returns per unit of risk. The VHAI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.73  in VHAI on October 1, 2024 and sell it today you would lose (0.16) from holding VHAI or give up 21.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.25%
Values	Daily Returns

Brunswick  vs.  VHAI

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 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.

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, VHAI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brunswick and VHAI

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

The idea behind Brunswick and VHAI 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.