Correlation Between Bowlin Travel and Strategic Education

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

Diversification Opportunities for Bowlin Travel and Strategic Education

-0.15

Correlation Coefficient

Bowlin Travel  Strategic Education

Good diversification

The 3 months correlation between Bowlin and Strategic is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bowlin Travel Centers and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Bowlin Travel i.e., Bowlin Travel and Strategic Education go up and down completely randomly.

Pair Corralation between Bowlin Travel and Strategic Education

Given the investment horizon of 90 days Bowlin Travel is expected to generate 1.37 times less return on investment than Strategic Education. In addition to that, Bowlin Travel is 1.64 times more volatile than Strategic Education. It trades about 0.01 of its total potential returns per unit of risk. Strategic Education is currently generating about 0.03 per unit of volatility. If you would invest  7,528  in Strategic Education on September 22, 2024 and sell it today you would earn a total of  1,742  from holding Strategic Education or generate 23.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Bowlin Travel Centers  vs.  Strategic Education

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.

Strategic Education

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategic Education is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bowlin Travel and Strategic Education

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

The idea behind Bowlin Travel Centers and Strategic Education 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.