Correlation Between Brunswick and Ree Automotive

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

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

Diversification Opportunities for Brunswick and Ree Automotive

0.88

Correlation Coefficient

Brunswick  Ree Automotive

Very poor diversification

The 3 months correlation between Brunswick and Ree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Ree Automotive Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ree Automotive Holding 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 Ree Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ree Automotive Holding has no effect on the direction of Brunswick i.e., Brunswick and Ree Automotive go up and down completely randomly.

Pair Corralation between Brunswick and Ree Automotive

Allowing for the 90-day total investment horizon Brunswick is expected to generate 0.33 times more return on investment than Ree Automotive. However, Brunswick is 3.02 times less risky than Ree Automotive. It trades about -0.1 of its potential returns per unit of risk. Ree Automotive Holding is currently generating about -0.25 per unit of risk. If you would invest  6,406  in Brunswick on December 28, 2024 and sell it today you would lose (807.00) from holding Brunswick or give up 12.6% of portfolio value over 90 days.

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

Brunswick  vs.  Ree Automotive Holding

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ree Automotive Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ree Automotive Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Brunswick and Ree Automotive

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

The idea behind Brunswick and Ree Automotive Holding 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.