Correlation Between Bowmo and BHPA
Can any of the company-specific risk be diversified away by investing in both Bowmo and BHPA 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 Bowmo and BHPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bowmo Inc and BHPA Inc, you can compare the effects of market volatilities on Bowmo and BHPA 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 Bowmo with a short position of BHPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowmo and BHPA.
Diversification Opportunities for Bowmo and BHPA
Modest diversification
The 3 months correlation between Bowmo and BHPA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bowmo Inc and BHPA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHPA Inc and Bowmo 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 Bowmo Inc are associated (or correlated) with BHPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHPA Inc has no effect on the direction of Bowmo i.e., Bowmo and BHPA go up and down completely randomly.
Pair Corralation between Bowmo and BHPA
Given the investment horizon of 90 days Bowmo Inc is expected to generate 3.69 times more return on investment than BHPA. However, Bowmo is 3.69 times more volatile than BHPA Inc. It trades about 0.24 of its potential returns per unit of risk. BHPA Inc is currently generating about 0.08 per unit of risk. If you would invest 0.02 in Bowmo Inc on August 28, 2024 and sell it today you would earn a total of 0.23 from holding Bowmo Inc or generate 1150.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bowmo Inc vs. BHPA Inc
Performance |
| Timeline |
| Bowmo Inc |
| BHPA Inc |
Bowmo and BHPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bowmo and BHPA
The main advantage of trading using opposite Bowmo and BHPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bowmo position performs unexpectedly, BHPA 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 BHPA will offset losses from the drop in BHPA's long position.The idea behind Bowmo Inc and BHPA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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