Correlation Between Advanced Micro and Bowhead Specialty

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

By analyzing existing cross correlation between Advanced Micro Devices and Bowhead Specialty Holdings, you can compare the effects of market volatilities on Advanced Micro and Bowhead Specialty 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 Advanced Micro with a short position of Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and Bowhead Specialty.

Diversification Opportunities for Advanced Micro and Bowhead Specialty

-0.71

Correlation Coefficient

Advanced Micro  Bowhead Specialty

Pay attention - limited upside

The 3 months correlation between Advanced and Bowhead is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty and Advanced Micro 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 Advanced Micro Devices are associated (or correlated) with Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Advanced Micro i.e., Advanced Micro and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Advanced Micro and Bowhead Specialty

Considering the 90-day investment horizon Advanced Micro is expected to generate 1.66 times less return on investment than Bowhead Specialty. In addition to that, Advanced Micro is 1.32 times more volatile than Bowhead Specialty Holdings. It trades about 0.07 of its total potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.14 per unit of volatility. If you would invest  2,380  in Bowhead Specialty Holdings on September 5, 2024 and sell it today you would earn a total of  1,201  from holding Bowhead Specialty Holdings or generate 50.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.27%
Values	Daily Returns

Advanced Micro Devices  vs.  Bowhead Specialty Holdings

Advanced Micro Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Advanced Micro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bowhead Specialty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Micro and Bowhead Specialty

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

The idea behind Advanced Micro Devices and Bowhead Specialty Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.