Correlation Between Bowler Metcalf and Aveng

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

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

Diversification Opportunities for Bowler Metcalf and Aveng

0.32

Correlation Coefficient

Bowler Metcalf  Aveng

Weak diversification

The 3 months correlation between Bowler and Aveng is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bowler Metcalf and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng 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 Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of Bowler Metcalf i.e., Bowler Metcalf and Aveng go up and down completely randomly.

Pair Corralation between Bowler Metcalf and Aveng

Assuming the 90 days trading horizon Bowler Metcalf is expected to generate 1.32 times less return on investment than Aveng. In addition to that, Bowler Metcalf is 2.49 times more volatile than Aveng. It trades about 0.05 of its total potential returns per unit of risk. Aveng is currently generating about 0.17 per unit of volatility. If you would invest  70,700  in Aveng on October 13, 2024 and sell it today you would earn a total of  59,000  from holding Aveng or generate 83.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bowler Metcalf  vs.  Aveng

Bowler Metcalf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bowler Metcalf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bowler Metcalf is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aveng

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bowler Metcalf and Aveng

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

The idea behind Bowler Metcalf and Aveng 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.