Correlation Between Compass Diversified and Bowen Acquisition

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

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

Diversification Opportunities for Compass Diversified and Bowen Acquisition

0.83

Correlation Coefficient

Compass Diversified  Bowen Acquisition

Very poor diversification

The 3 months correlation between Compass and Bowen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified Holdings and Bowen Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowen Acquisition Corp and Compass Diversified 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 Compass Diversified Holdings are associated (or correlated) with Bowen Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowen Acquisition Corp has no effect on the direction of Compass Diversified i.e., Compass Diversified and Bowen Acquisition go up and down completely randomly.

Pair Corralation between Compass Diversified and Bowen Acquisition

Given the investment horizon of 90 days Compass Diversified Holdings is expected to under-perform the Bowen Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Compass Diversified Holdings is 6.31 times less risky than Bowen Acquisition. The stock trades about -0.13 of its potential returns per unit of risk. The Bowen Acquisition Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,092  in Bowen Acquisition Corp on December 20, 2024 and sell it today you would lose (382.00) from holding Bowen Acquisition Corp or give up 34.98% of portfolio value over 90 days.

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

Compass Diversified Holdings  vs.  Bowen Acquisition Corp

Compass Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compass Diversified Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Bowen Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bowen Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bowen Acquisition is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Compass Diversified and Bowen Acquisition

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

The idea behind Compass Diversified Holdings and Bowen Acquisition 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.