Correlation Between Elite Education and Bowlin Travel

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

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

Diversification Opportunities for Elite Education and Bowlin Travel

-0.39

Correlation Coefficient

Elite Education  Bowlin Travel

Very good diversification

The 3 months correlation between Elite and Bowlin is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Elite Education Group and Bowlin Travel Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowlin Travel Centers and Elite Education 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 Elite Education Group are associated (or correlated) with Bowlin Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowlin Travel Centers has no effect on the direction of Elite Education i.e., Elite Education and Bowlin Travel go up and down completely randomly.

Pair Corralation between Elite Education and Bowlin Travel

Given the investment horizon of 90 days Elite Education Group is expected to generate 2.17 times more return on investment than Bowlin Travel. However, Elite Education is 2.17 times more volatile than Bowlin Travel Centers. It trades about 0.07 of its potential returns per unit of risk. Bowlin Travel Centers is currently generating about 0.01 per unit of risk. If you would invest  104.00  in Elite Education Group on October 26, 2024 and sell it today you would earn a total of  3.00  from holding Elite Education Group or generate 2.88% return on investment over 90 days.

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

Elite Education Group  vs.  Bowlin Travel Centers

Elite Education Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

Bowlin Travel Centers

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bowlin Travel Centers are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bowlin Travel is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Elite Education and Bowlin Travel

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

The idea behind Elite Education Group and Bowlin Travel Centers 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.