Correlation Between Imax Corp and Bowhead Specialty

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

By analyzing existing cross correlation between Imax Corp and Bowhead Specialty Holdings, you can compare the effects of market volatilities on Imax Corp and Bowhead Specialty 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 Imax Corp with a short position of Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imax Corp and Bowhead Specialty.

Diversification Opportunities for Imax Corp and Bowhead Specialty

0.25

Correlation Coefficient

Imax Corp  Bowhead Specialty

Modest diversification

The 3 months correlation between Imax and Bowhead is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Imax Corp and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty and Imax Corp 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 Imax Corp are associated (or correlated) with Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Imax Corp i.e., Imax Corp and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Imax Corp and Bowhead Specialty

Given the investment horizon of 90 days Imax Corp is expected to generate 4.31 times less return on investment than Bowhead Specialty. But when comparing it to its historical volatility, Imax Corp is 1.09 times less risky than Bowhead Specialty. It trades about 0.02 of its potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,431  in Bowhead Specialty Holdings on December 18, 2024 and sell it today you would earn a total of  221.00  from holding Bowhead Specialty Holdings or generate 6.44% return on investment over 90 days.

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

Imax Corp  vs.  Bowhead Specialty Holdings

Imax Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imax Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Imax Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Bowhead Specialty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bowhead Specialty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Imax Corp and Bowhead Specialty

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

The idea behind Imax Corp and Bowhead Specialty Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.