Correlation Between BHPA and Bowmo
Can any of the company-specific risk be diversified away by investing in both BHPA and Bowmo 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 BHPA and Bowmo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHPA Inc and Bowmo Inc, you can compare the effects of market volatilities on BHPA and Bowmo 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 BHPA with a short position of Bowmo. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHPA and Bowmo.
Diversification Opportunities for BHPA and Bowmo
Modest diversification
The 3 months correlation between BHPA and Bowmo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BHPA Inc and Bowmo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowmo Inc and BHPA 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 BHPA Inc are associated (or correlated) with Bowmo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowmo Inc has no effect on the direction of BHPA i.e., BHPA and Bowmo go up and down completely randomly.
Pair Corralation between BHPA and Bowmo
Given the investment horizon of 90 days BHPA is expected to generate 2.58 times less return on investment than Bowmo. But when comparing it to its historical volatility, BHPA Inc is 2.94 times less risky than Bowmo. It trades about 0.21 of its potential returns per unit of risk. Bowmo Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.18 in Bowmo Inc on August 28, 2024 and sell it today you would earn a total of 0.07 from holding Bowmo Inc or generate 38.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHPA Inc vs. Bowmo Inc
Performance |
| Timeline |
| BHPA Inc |
| Bowmo Inc |
BHPA and Bowmo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHPA and Bowmo
The main advantage of trading using opposite BHPA and Bowmo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHPA position performs unexpectedly, Bowmo 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 Bowmo will offset losses from the drop in Bowmo's long position.The idea behind BHPA Inc and Bowmo Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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