Correlation Between Boston Omaha and Deluxe

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

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

Diversification Opportunities for Boston Omaha and Deluxe

0.4

Correlation Coefficient

Boston Omaha  Deluxe

Very weak diversification

The 3 months correlation between Boston and Deluxe is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Boston Omaha Corp and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe and Boston Omaha 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 Boston Omaha Corp are associated (or correlated) with Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of Boston Omaha i.e., Boston Omaha and Deluxe go up and down completely randomly.

Pair Corralation between Boston Omaha and Deluxe

Considering the 90-day investment horizon Boston Omaha is expected to generate 2.12 times less return on investment than Deluxe. But when comparing it to its historical volatility, Boston Omaha Corp is 1.61 times less risky than Deluxe. It trades about 0.1 of its potential returns per unit of risk. Deluxe is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,947  in Deluxe on September 3, 2024 and sell it today you would earn a total of  370.00  from holding Deluxe or generate 19.0% return on investment over 90 days.

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

Boston Omaha Corp  vs.  Deluxe

Boston Omaha Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Omaha Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Boston Omaha may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deluxe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Omaha and Deluxe

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

The idea behind Boston Omaha Corp and Deluxe 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.