Correlation Between PACCAR and Brunswick

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

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

Diversification Opportunities for PACCAR and Brunswick

0.76

Correlation Coefficient

PACCAR  Brunswick

Poor diversification

The 3 months correlation between PACCAR and Brunswick is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding PACCAR Inc and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and PACCAR 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 PACCAR Inc are associated (or correlated) with Brunswick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick has no effect on the direction of PACCAR i.e., PACCAR and Brunswick go up and down completely randomly.

Pair Corralation between PACCAR and Brunswick

Given the investment horizon of 90 days PACCAR Inc is expected to generate 0.84 times more return on investment than Brunswick. However, PACCAR Inc is 1.19 times less risky than Brunswick. It trades about -0.04 of its potential returns per unit of risk. Brunswick is currently generating about -0.1 per unit of risk. If you would invest  10,329  in PACCAR Inc on December 29, 2024 and sell it today you would lose (510.00) from holding PACCAR Inc or give up 4.94% of portfolio value over 90 days.

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

PACCAR Inc  vs.  Brunswick

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with PACCAR and Brunswick

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

The idea behind PACCAR Inc and Brunswick 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.