Correlation Between Bowhead Specialty and Kingstone Companies

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

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

Diversification Opportunities for Bowhead Specialty and Kingstone Companies

0.88

Correlation Coefficient

Bowhead Specialty  Kingstone Companies

Very poor diversification

The 3 months correlation between Bowhead and Kingstone is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and Kingstone Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstone Companies and Bowhead Specialty 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 Bowhead Specialty Holdings are associated (or correlated) with Kingstone Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstone Companies has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and Kingstone Companies go up and down completely randomly.

Pair Corralation between Bowhead Specialty and Kingstone Companies

Considering the 90-day investment horizon Bowhead Specialty is expected to generate 3.39 times less return on investment than Kingstone Companies. But when comparing it to its historical volatility, Bowhead Specialty Holdings is 1.88 times less risky than Kingstone Companies. It trades about 0.15 of its potential returns per unit of risk. Kingstone Companies is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  904.00  in Kingstone Companies on September 3, 2024 and sell it today you would earn a total of  771.00  from holding Kingstone Companies or generate 85.29% return on investment over 90 days.

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

Bowhead Specialty Holdings  vs.  Kingstone Companies

Bowhead Specialty

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Kingstone Companies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingstone Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bowhead Specialty and Kingstone Companies

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

The idea behind Bowhead Specialty Holdings and Kingstone Companies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.