Correlation Between Ree Automotive and Brunswick

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

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

Diversification Opportunities for Ree Automotive and Brunswick

0.64

Correlation Coefficient

Ree Automotive  Brunswick

Poor diversification

The 3 months correlation between Ree and Brunswick is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ree Automotive Holding and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Ree Automotive 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 Ree Automotive Holding are associated (or correlated) with Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of Ree Automotive i.e., Ree Automotive and Brunswick go up and down completely randomly.

Pair Corralation between Ree Automotive and Brunswick

Considering the 90-day investment horizon Ree Automotive Holding is expected to generate 4.35 times more return on investment than Brunswick. However, Ree Automotive is 4.35 times more volatile than Brunswick. It trades about 0.21 of its potential returns per unit of risk. Brunswick is currently generating about 0.04 per unit of risk. If you would invest  309.00  in Ree Automotive Holding on September 5, 2024 and sell it today you would earn a total of  522.00  from holding Ree Automotive Holding or generate 168.93% return on investment over 90 days.

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

Ree Automotive Holding  vs.  Brunswick

Ree Automotive Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ree Automotive Holding are ranked lower than 16 (%) 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.

Brunswick

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Ree Automotive and Brunswick

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

The idea behind Ree Automotive Holding and Brunswick 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 Global Correlations module to find global opportunities by holding instruments from different markets.