Correlation Between Bowlero Corp and Nikon Corp

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

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

Diversification Opportunities for Bowlero Corp and Nikon Corp

0.12

Correlation Coefficient

Bowlero Corp  Nikon Corp

Average diversification

The 3 months correlation between Bowlero and Nikon is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bowlero Corp and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon Corp and Bowlero Corp 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 Bowlero Corp are associated (or correlated) with Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of Bowlero Corp i.e., Bowlero Corp and Nikon Corp go up and down completely randomly.

Pair Corralation between Bowlero Corp and Nikon Corp

Given the investment horizon of 90 days Bowlero Corp is expected to generate 1.28 times more return on investment than Nikon Corp. However, Bowlero Corp is 1.28 times more volatile than Nikon Corp. It trades about 0.01 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.01 per unit of risk. If you would invest  1,189  in Bowlero Corp on September 14, 2024 and sell it today you would lose (20.00) from holding Bowlero Corp or give up 1.68% of portfolio value over 90 days.

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

Bowlero Corp  vs.  Nikon Corp

Bowlero Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bowlero Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bowlero Corp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Nikon Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nikon Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nikon Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bowlero Corp and Nikon Corp

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

The idea behind Bowlero Corp and Nikon 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.