Correlation Between Brunswick and Malibu Boats

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

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

Diversification Opportunities for Brunswick and Malibu Boats

0.91

Correlation Coefficient

Brunswick  Malibu Boats

Almost no diversification

The 3 months correlation between Brunswick and Malibu is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Malibu Boats in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malibu Boats 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 Malibu Boats. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malibu Boats has no effect on the direction of Brunswick i.e., Brunswick and Malibu Boats go up and down completely randomly.

Pair Corralation between Brunswick and Malibu Boats

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Malibu Boats. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 1.44 times less risky than Malibu Boats. The stock trades about -0.22 of its potential returns per unit of risk. The Malibu Boats is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  4,335  in Malibu Boats on November 28, 2024 and sell it today you would lose (840.00) from holding Malibu Boats or give up 19.38% of portfolio value over 90 days.

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

Brunswick  vs.  Malibu Boats

Brunswick

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Malibu Boats

Risk-Adjusted Performance

Very Weak

Over the last 90 days Malibu Boats has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Brunswick and Malibu Boats

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

The idea behind Brunswick and Malibu Boats 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.