Correlation Between Bowler Metcalf and AfroCentric Investment

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

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

Diversification Opportunities for Bowler Metcalf and AfroCentric Investment

-0.17

Correlation Coefficient

Bowler Metcalf  AfroCentric Investment

Good diversification

The 3 months correlation between Bowler and AfroCentric is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bowler Metcalf and AfroCentric Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfroCentric Investment and Bowler Metcalf 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 Bowler Metcalf are associated (or correlated) with AfroCentric Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfroCentric Investment has no effect on the direction of Bowler Metcalf i.e., Bowler Metcalf and AfroCentric Investment go up and down completely randomly.

Pair Corralation between Bowler Metcalf and AfroCentric Investment

Assuming the 90 days trading horizon Bowler Metcalf is expected to under-perform the AfroCentric Investment. But the stock apears to be less risky and, when comparing its historical volatility, Bowler Metcalf is 3.14 times less risky than AfroCentric Investment. The stock trades about -0.09 of its potential returns per unit of risk. The AfroCentric Investment Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20,900  in AfroCentric Investment Corp on September 26, 2024 and sell it today you would earn a total of  600.00  from holding AfroCentric Investment Corp or generate 2.87% return on investment over 90 days.

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

Bowler Metcalf  vs.  AfroCentric Investment Corp

Bowler Metcalf

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bowler Metcalf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bowler Metcalf may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AfroCentric Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AfroCentric Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bowler Metcalf and AfroCentric Investment

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

The idea behind Bowler Metcalf and AfroCentric Investment Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.