Correlation Between Bowman Consulting and Arcadis NV

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

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

Diversification Opportunities for Bowman Consulting and Arcadis NV

0.62

Correlation Coefficient

Bowman Consulting  Arcadis NV

Poor diversification

The 3 months correlation between Bowman and Arcadis is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bowman Consulting Group and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV and Bowman Consulting 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 Bowman Consulting Group are associated (or correlated) with Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of Bowman Consulting i.e., Bowman Consulting and Arcadis NV go up and down completely randomly.

Pair Corralation between Bowman Consulting and Arcadis NV

Given the investment horizon of 90 days Bowman Consulting Group is expected to generate 1.6 times more return on investment than Arcadis NV. However, Bowman Consulting is 1.6 times more volatile than Arcadis NV. It trades about -0.04 of its potential returns per unit of risk. Arcadis NV is currently generating about -0.08 per unit of risk. If you would invest  2,516  in Bowman Consulting Group on December 29, 2024 and sell it today you would lose (269.00) from holding Bowman Consulting Group or give up 10.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

Bowman Consulting Group  vs.  Arcadis NV

Bowman Consulting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowman Consulting Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Arcadis NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bowman Consulting and Arcadis NV

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

The idea behind Bowman Consulting Group and Arcadis NV 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.