Correlation Between Brunswick and Dixie

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

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

Diversification Opportunities for Brunswick and Dixie

-0.42

Correlation Coefficient

Brunswick  Dixie

Very good diversification

The 3 months correlation between Brunswick and Dixie is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and The Dixie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixie Group 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 Dixie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixie Group has no effect on the direction of Brunswick i.e., Brunswick and Dixie go up and down completely randomly.

Pair Corralation between Brunswick and Dixie

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Dixie. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 3.25 times less risky than Dixie. The stock trades about -0.22 of its potential returns per unit of risk. The The Dixie Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  52.00  in The Dixie Group on January 25, 2024 and sell it today you would earn a total of  0.50  from holding The Dixie Group or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brunswick  vs.  The Dixie Group

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.

Dixie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Dixie Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Brunswick and Dixie

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

The idea behind Brunswick and The Dixie Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.