Correlation Between Escalade Incorporated and BOWL Old

Can any of the company-specific risk be diversified away by investing in both Escalade Incorporated and BOWL Old 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 Escalade Incorporated and BOWL Old into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Escalade Incorporated and BOWL Old, you can compare the effects of market volatilities on Escalade Incorporated and BOWL Old 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 Escalade Incorporated with a short position of BOWL Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Escalade Incorporated and BOWL Old.

Diversification Opportunities for Escalade Incorporated and BOWL Old

-0.18

Correlation Coefficient

Escalade Incorporated  BOWL Old

Good diversification

The 3 months correlation between Escalade and BOWL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and BOWL Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOWL Old and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with BOWL Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOWL Old has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and BOWL Old go up and down completely randomly.

Pair Corralation between Escalade Incorporated and BOWL Old

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 4.63 times less return on investment than BOWL Old. But when comparing it to its historical volatility, Escalade Incorporated is 1.27 times less risky than BOWL Old. It trades about 0.07 of its potential returns per unit of risk. BOWL Old is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,030  in BOWL Old on December 30, 2024 and sell it today you would earn a total of  261.00  from holding BOWL Old or generate 25.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Escalade Incorporated  vs.  BOWL Old

Escalade Incorporated

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BOWL Old

Risk-Adjusted Performance

Solid

Over the last 90 days BOWL Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite fragile basic indicators, BOWL Old disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Escalade Incorporated and BOWL Old

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

The idea behind Escalade Incorporated and BOWL Old 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.