Correlation Between Brunswick and Cedar Fair

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

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

Diversification Opportunities for Brunswick and Cedar Fair

0.4

Correlation Coefficient

Brunswick  Cedar Fair

Very weak diversification

The 3 months correlation between Brunswick and Cedar is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Cedar Fair LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cedar Fair LP 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 Cedar Fair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cedar Fair LP has no effect on the direction of Brunswick i.e., Brunswick and Cedar Fair go up and down completely randomly.

Pair Corralation between Brunswick and Cedar Fair

Allowing for the 90-day total investment horizon Brunswick is expected to generate 1.21 times more return on investment than Cedar Fair. However, Brunswick is 1.21 times more volatile than Cedar Fair LP. It trades about 0.05 of its potential returns per unit of risk. Cedar Fair LP is currently generating about -0.03 per unit of risk. If you would invest  8,249  in Brunswick on January 26, 2024 and sell it today you would earn a total of  364.00  from holding Brunswick or generate 4.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Brunswick  vs.  Cedar Fair LP

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.

Cedar Fair LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cedar Fair LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cedar Fair is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Brunswick and Cedar Fair

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

The idea behind Brunswick and Cedar Fair LP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.