Correlation Between GM and Bowlin Travel

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

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

Diversification Opportunities for GM and Bowlin Travel

0.21

Correlation Coefficient

GM  Bowlin Travel

Modest diversification

The 3 months correlation between GM and Bowlin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Bowlin Travel go up and down completely randomly.

Pair Corralation between GM and Bowlin Travel

If you would invest  400.00  in Bowlin Travel Centers on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Bowlin Travel Centers or generate 0.0% return on investment over 90 days.

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

General Motors  vs.  Bowlin Travel Centers

General Motors

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bowlin Travel Centers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bowlin Travel Centers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bowlin Travel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with GM and Bowlin Travel

The main advantage of trading using opposite GM and Bowlin Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.