Correlation Between Brunswick and Cavco Industries

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

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

Diversification Opportunities for Brunswick and Cavco Industries

0.75

Correlation Coefficient

Brunswick  Cavco Industries

Poor diversification

The 3 months correlation between Brunswick and Cavco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Cavco Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavco Industries 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 Cavco Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavco Industries has no effect on the direction of Brunswick i.e., Brunswick and Cavco Industries go up and down completely randomly.

Pair Corralation between Brunswick and Cavco Industries

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Cavco Industries. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 1.11 times less risky than Cavco Industries. The stock trades about -0.32 of its potential returns per unit of risk. The Cavco Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  37,777  in Cavco Industries on February 3, 2024 and sell it today you would lose (575.00) from holding Cavco Industries or give up 1.52% of portfolio value over 90 days.

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

Brunswick  vs.  Cavco Industries

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 rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cavco Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cavco Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cavco Industries may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Brunswick and Cavco Industries

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

The idea behind Brunswick and Cavco 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.