Correlation Between Nations VolDex and Brunswick

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

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

Diversification Opportunities for Nations VolDex and Brunswick

-0.78

Correlation Coefficient

Nations VolDex  Brunswick

Pay attention - limited upside

The 3 months correlation between Nations and Brunswick is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nations VolDex and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Nations VolDex 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 Nations VolDex 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 Nations VolDex i.e., Nations VolDex and Brunswick go up and down completely randomly.

Pair Corralation between Nations VolDex and Brunswick

Assuming the 90 days trading horizon Nations VolDex is expected to generate 4.24 times more return on investment than Brunswick. However, Nations VolDex is 4.24 times more volatile than Brunswick. It trades about 0.1 of its potential returns per unit of risk. Brunswick is currently generating about -0.13 per unit of risk. If you would invest  1,399  in Nations VolDex on December 30, 2024 and sell it today you would earn a total of  513.00  from holding Nations VolDex or generate 36.67% return on investment over 90 days.

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

Nations VolDex  vs.  Brunswick

Pair Trading with Nations VolDex and Brunswick

The main advantage of trading using opposite Nations VolDex and Brunswick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nations VolDex 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 Nations VolDex 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.