Correlation Between Bowler Metcalf and We Buy

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

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

Diversification Opportunities for Bowler Metcalf and We Buy

0.27

Correlation Coefficient

Bowler Metcalf  We Buy

Modest diversification

The 3 months correlation between Bowler and WBC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bowler Metcalf and We Buy Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on We Buy Cars 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 We Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of We Buy Cars has no effect on the direction of Bowler Metcalf i.e., Bowler Metcalf and We Buy go up and down completely randomly.

Pair Corralation between Bowler Metcalf and We Buy

Assuming the 90 days trading horizon Bowler Metcalf is expected to generate 1.08 times less return on investment than We Buy. In addition to that, Bowler Metcalf is 3.75 times more volatile than We Buy Cars. It trades about 0.05 of its total potential returns per unit of risk. We Buy Cars is currently generating about 0.21 per unit of volatility. If you would invest  270,621  in We Buy Cars on September 24, 2024 and sell it today you would earn a total of  159,479  from holding We Buy Cars or generate 58.93% 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.  We Buy Cars

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.

We Buy Cars

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in We Buy Cars are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, We Buy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bowler Metcalf and We Buy

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

The idea behind Bowler Metcalf and We Buy Cars 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.