Correlation Between CRA International and Bowman Consulting

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

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

Diversification Opportunities for CRA International and Bowman Consulting

-0.32

Correlation Coefficient

CRA International  Bowman Consulting

Very good diversification

The 3 months correlation between CRA and Bowman is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and Bowman Consulting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowman Consulting and CRA International 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 CRA International are associated (or correlated) with Bowman Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowman Consulting has no effect on the direction of CRA International i.e., CRA International and Bowman Consulting go up and down completely randomly.

Pair Corralation between CRA International and Bowman Consulting

Given the investment horizon of 90 days CRA International is expected to generate 0.72 times more return on investment than Bowman Consulting. However, CRA International is 1.4 times less risky than Bowman Consulting. It trades about -0.03 of its potential returns per unit of risk. Bowman Consulting Group is currently generating about -0.03 per unit of risk. If you would invest  18,636  in CRA International on December 27, 2024 and sell it today you would lose (1,025) from holding CRA International or give up 5.5% of portfolio value over 90 days.

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

CRA International  vs.  Bowman Consulting Group

CRA International

Risk-Adjusted Performance

Very Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 very healthy primary indicators, Bowman Consulting is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CRA International and Bowman Consulting

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

The idea behind CRA International and Bowman Consulting Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.