Correlation Between Hollywood Bowl and Advanced Medical

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

By analyzing existing cross correlation between Hollywood Bowl Group and Advanced Medical Solutions, you can compare the effects of market volatilities on Hollywood Bowl and Advanced Medical 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 Hollywood Bowl with a short position of Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and Advanced Medical.

Diversification Opportunities for Hollywood Bowl and Advanced Medical

0.02

Correlation Coefficient

Hollywood Bowl  Advanced Medical

Significant diversification

The 3 months correlation between Hollywood and Advanced is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol and Hollywood Bowl 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 Hollywood Bowl Group are associated (or correlated) with Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Hollywood Bowl i.e., Hollywood Bowl and Advanced Medical go up and down completely randomly.

Pair Corralation between Hollywood Bowl and Advanced Medical

Assuming the 90 days trading horizon Hollywood Bowl Group is expected to generate 1.42 times more return on investment than Advanced Medical. However, Hollywood Bowl is 1.42 times more volatile than Advanced Medical Solutions. It trades about -0.1 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.15 per unit of risk. If you would invest  31,700  in Hollywood Bowl Group on September 24, 2024 and sell it today you would lose (2,150) from holding Hollywood Bowl Group or give up 6.78% of portfolio value over 90 days.

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

Hollywood Bowl Group  vs.  Advanced Medical Solutions

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hollywood Bowl is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Hollywood Bowl and Advanced Medical

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

The idea behind Hollywood Bowl Group and Advanced Medical Solutions 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.