Correlation Between Columbia Sportswear and Brunswick

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

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

Diversification Opportunities for Columbia Sportswear and Brunswick

-0.07

Correlation Coefficient

Columbia Sportswear  Brunswick

Good diversification

The 3 months correlation between Columbia and Brunswick is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Brunswick in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and Brunswick go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Brunswick

Given the investment horizon of 90 days Columbia Sportswear is expected to generate 0.81 times more return on investment than Brunswick. However, Columbia Sportswear is 1.24 times less risky than Brunswick. It trades about 0.01 of its potential returns per unit of risk. Brunswick is currently generating about -0.04 per unit of risk. If you would invest  8,106  in Columbia Sportswear on February 2, 2024 and sell it today you would earn a total of  42.00  from holding Columbia Sportswear or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Columbia Sportswear  vs.  Brunswick

Columbia Sportswear

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brunswick

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Brunswick is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Columbia Sportswear and Brunswick

The main advantage of trading using opposite Columbia Sportswear and Brunswick positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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 Columbia Sportswear 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.