Correlation Between Brunswick and Universal Tracking

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

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

Diversification Opportunities for Brunswick and Universal Tracking

0.0

Correlation Coefficient

Brunswick  Universal Tracking

Pay attention - limited upside

The 3 months correlation between Brunswick and Universal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Universal Tracking Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Tracking 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 Universal Tracking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Tracking has no effect on the direction of Brunswick i.e., Brunswick and Universal Tracking go up and down completely randomly.

Pair Corralation between Brunswick and Universal Tracking

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Universal Tracking. But the stock apears to be less risky and, when comparing its historical volatility, Brunswick is 7.65 times less risky than Universal Tracking. The stock trades about -0.01 of its potential returns per unit of risk. The Universal Tracking Solutions is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Universal Tracking Solutions on October 4, 2024 and sell it today you would lose (0.09) from holding Universal Tracking Solutions or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Brunswick  vs.  Universal Tracking Solutions

Brunswick

Risk-Adjusted Performance

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

Universal Tracking

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Tracking Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Universal Tracking is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Brunswick and Universal Tracking

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

The idea behind Brunswick and Universal Tracking Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.