Correlation Between Bowhead Specialty and SGS SA

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

Diversification Opportunities for Bowhead Specialty and SGS SA

0.19

Correlation Coefficient

Bowhead Specialty  SGS SA

Average diversification

The 3 months correlation between Bowhead and SGS is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Bowhead Specialty i.e., Bowhead Specialty and SGS SA go up and down completely randomly.

Pair Corralation between Bowhead Specialty and SGS SA

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to generate 0.66 times more return on investment than SGS SA. However, Bowhead Specialty Holdings is 1.51 times less risky than SGS SA. It trades about 0.08 of its potential returns per unit of risk. SGS SA is currently generating about 0.01 per unit of risk. If you would invest  3,430  in Bowhead Specialty Holdings on December 19, 2024 and sell it today you would earn a total of  278.00  from holding Bowhead Specialty Holdings or generate 8.1% return on investment over 90 days.

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

Bowhead Specialty Holdings  vs.  SGS SA

Bowhead Specialty

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Bowhead Specialty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SGS SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SGS SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bowhead Specialty and SGS SA

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

The idea behind Bowhead Specialty Holdings and SGS SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.