Correlation Between Bowlin Travel and Dixons Carphone

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

By analyzing existing cross correlation between Bowlin Travel Centers and Dixons Carphone plc, you can compare the effects of market volatilities on Bowlin Travel and Dixons Carphone 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 Bowlin Travel with a short position of Dixons Carphone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowlin Travel and Dixons Carphone.

Diversification Opportunities for Bowlin Travel and Dixons Carphone

0.1

Correlation Coefficient

Bowlin Travel  Dixons Carphone

Average diversification

The 3 months correlation between Bowlin and Dixons is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bowlin Travel Centers and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone plc and Bowlin Travel 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 Bowlin Travel Centers are associated (or correlated) with Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of Bowlin Travel i.e., Bowlin Travel and Dixons Carphone go up and down completely randomly.

Pair Corralation between Bowlin Travel and Dixons Carphone

Given the investment horizon of 90 days Bowlin Travel is expected to generate 3.44 times less return on investment than Dixons Carphone. But when comparing it to its historical volatility, Bowlin Travel Centers is 1.0 times less risky than Dixons Carphone. It trades about 0.01 of its potential returns per unit of risk. Dixons Carphone plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Dixons Carphone plc on September 22, 2024 and sell it today you would earn a total of  48.00  from holding Dixons Carphone plc or generate 68.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Bowlin Travel Centers  vs.  Dixons Carphone plc

Bowlin Travel Centers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dixons Carphone plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dixons Carphone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bowlin Travel and Dixons Carphone

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

The idea behind Bowlin Travel Centers and Dixons Carphone plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.