Correlation Between Dicks Sporting and Brunswick

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

Diversification Opportunities for Dicks Sporting and Brunswick

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between Dicks and Brunswick is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Dicks Sporting 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 Dicks Sporting Goods 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 Dicks Sporting i.e., Dicks Sporting and Brunswick go up and down completely randomly.

Pair Corralation between Dicks Sporting and Brunswick

Considering the 90-day investment horizon Dicks Sporting Goods is expected to generate 1.25 times more return on investment than Brunswick. However, Dicks Sporting is 1.25 times more volatile than Brunswick. It trades about 0.07 of its potential returns per unit of risk. Brunswick is currently generating about 0.04 per unit of risk. If you would invest  9,947  in Dicks Sporting Goods on December 29, 2023 and sell it today you would earn a total of  12,312  from holding Dicks Sporting Goods or generate 123.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dicks Sporting Goods  vs.  Brunswick

 Performance 
       Timeline  
Dicks Sporting Goods 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, Dicks Sporting unveiled solid returns over the last few months and may actually be approaching a breakup point.
Brunswick 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dicks Sporting and Brunswick Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dicks Sporting and Brunswick

The main advantage of trading using opposite Dicks Sporting and Brunswick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting 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 Dicks Sporting Goods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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