Correlation Between American Financial and Brunswick Corp

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

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

Diversification Opportunities for American Financial and Brunswick Corp

0.55

Correlation Coefficient

American Financial  Brunswick Corp

Very weak diversification

The 3 months correlation between American and Brunswick is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Brunswick Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick Corp and American Financial 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 American Financial Group are associated (or correlated) with Brunswick Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick Corp has no effect on the direction of American Financial i.e., American Financial and Brunswick Corp go up and down completely randomly.

Pair Corralation between American Financial and Brunswick Corp

Given the investment horizon of 90 days American Financial Group is expected to under-perform the Brunswick Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, American Financial Group is 1.04 times less risky than Brunswick Corp. The preferred stock trades about -0.4 of its potential returns per unit of risk. The Brunswick Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,448  in Brunswick Corp on September 27, 2024 and sell it today you would lose (9.00) from holding Brunswick Corp or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

American Financial Group  vs.  Brunswick Corp

American Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Brunswick Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brunswick Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Financial and Brunswick Corp

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

The idea behind American Financial Group and Brunswick Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.