Correlation Between Brunswick and Weibo Corp

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

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

Diversification Opportunities for Brunswick and Weibo Corp

0.48

Correlation Coefficient

Brunswick  Weibo Corp

Very weak diversification

The 3 months correlation between Brunswick and Weibo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Brunswick i.e., Brunswick and Weibo Corp go up and down completely randomly.

Pair Corralation between Brunswick and Weibo Corp

Allowing for the 90-day total investment horizon Brunswick is expected to generate 0.64 times more return on investment than Weibo Corp. However, Brunswick is 1.57 times less risky than Weibo Corp. It trades about -0.02 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.11 per unit of risk. If you would invest  8,194  in Brunswick on September 4, 2024 and sell it today you would lose (203.00) from holding Brunswick or give up 2.48% of portfolio value over 90 days.

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

Brunswick  vs.  Weibo Corp

Brunswick

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Weibo Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brunswick and Weibo Corp

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

The idea behind Brunswick and Weibo 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.