Correlation Between Brunswick and Signet Jewelers

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

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

Diversification Opportunities for Brunswick and Signet Jewelers

0.37

Correlation Coefficient

Brunswick  Signet Jewelers

Weak diversification

The 3 months correlation between Brunswick and Signet is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Signet Jewelers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signet Jewelers 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 Signet Jewelers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signet Jewelers has no effect on the direction of Brunswick i.e., Brunswick and Signet Jewelers go up and down completely randomly.

Pair Corralation between Brunswick and Signet Jewelers

Allowing for the 90-day total investment horizon Brunswick is expected to generate 0.46 times more return on investment than Signet Jewelers. However, Brunswick is 2.19 times less risky than Signet Jewelers. It trades about -0.1 of its potential returns per unit of risk. Signet Jewelers is currently generating about -0.09 per unit of risk. If you would invest  6,406  in Brunswick on December 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Brunswick  vs.  Signet Jewelers

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Signet Jewelers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Signet Jewelers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brunswick and Signet Jewelers

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

The idea behind Brunswick and Signet Jewelers 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.