Correlation Between Great Lakes and Bowman Consulting

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

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

Diversification Opportunities for Great Lakes and Bowman Consulting

0.18

Correlation Coefficient

Great Lakes  Bowman Consulting

Average diversification

The 3 months correlation between Great and Bowman is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Bowman Consulting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowman Consulting and Great Lakes 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 Great Lakes Dredge 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 Great Lakes i.e., Great Lakes and Bowman Consulting go up and down completely randomly.

Pair Corralation between Great Lakes and Bowman Consulting

Given the investment horizon of 90 days Great Lakes Dredge is expected to generate 0.78 times more return on investment than Bowman Consulting. However, Great Lakes Dredge is 1.28 times less risky than Bowman Consulting. It trades about 0.23 of its potential returns per unit of risk. Bowman Consulting Group is currently generating about 0.12 per unit of risk. If you would invest  946.00  in Great Lakes Dredge on September 2, 2024 and sell it today you would earn a total of  317.00  from holding Great Lakes Dredge or generate 33.51% return on investment over 90 days.

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

Great Lakes Dredge  vs.  Bowman Consulting Group

Great Lakes Dredge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bowman Consulting

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bowman Consulting Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Bowman Consulting displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Lakes and Bowman Consulting

The main advantage of trading using opposite Great Lakes and Bowman Consulting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes 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 Great Lakes Dredge 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.