Correlation Between Bowhead Specialty and Plexus Corp

Can any of the company-specific risk be diversified away by investing in both Bowhead Specialty and Plexus Corp 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 Plexus Corp 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 Plexus Corp, you can compare the effects of market volatilities on Bowhead Specialty and Plexus Corp 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 Plexus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowhead Specialty and Plexus Corp.

Diversification Opportunities for Bowhead Specialty and Plexus Corp

0.78

Correlation Coefficient

Bowhead Specialty  Plexus Corp

Poor diversification

The 3 months correlation between Bowhead and Plexus is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and Plexus Corp go up and down completely randomly.

Pair Corralation between Bowhead Specialty and Plexus Corp

Considering the 90-day investment horizon Bowhead Specialty is expected to generate 2.18 times less return on investment than Plexus Corp. In addition to that, Bowhead Specialty is 1.04 times more volatile than Plexus Corp. It trades about 0.07 of its total potential returns per unit of risk. Plexus Corp is currently generating about 0.15 per unit of volatility. If you would invest  14,489  in Plexus Corp on October 24, 2024 and sell it today you would earn a total of  2,547  from holding Plexus Corp or generate 17.58% return on investment over 90 days.

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

Bowhead Specialty Holdings  vs.  Plexus Corp

Bowhead Specialty

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Bowhead Specialty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Plexus Corp

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bowhead Specialty and Plexus Corp

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

The idea behind Bowhead Specialty Holdings and Plexus 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.