Correlation Between Boston Properties and Bowhead Specialty

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

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

Diversification Opportunities for Boston Properties and Bowhead Specialty

-0.14

Correlation Coefficient

Boston Properties  Bowhead Specialty

Good diversification

The 3 months correlation between Boston and Bowhead is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty and Boston Properties 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 Boston Properties are associated (or correlated) with Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Boston Properties i.e., Boston Properties and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Boston Properties and Bowhead Specialty

Considering the 90-day investment horizon Boston Properties is expected to under-perform the Bowhead Specialty. But the stock apears to be less risky and, when comparing its historical volatility, Boston Properties is 1.42 times less risky than Bowhead Specialty. The stock trades about 0.0 of its potential returns per unit of risk. The Bowhead Specialty Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,795  in Bowhead Specialty Holdings on September 15, 2024 and sell it today you would earn a total of  872.00  from holding Bowhead Specialty Holdings or generate 31.2% return on investment over 90 days.

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

Boston Properties  vs.  Bowhead Specialty Holdings

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Boston Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Bowhead Specialty

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Properties and Bowhead Specialty

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

The idea behind Boston Properties and Bowhead Specialty Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.