Correlation Between Johnson Outdoors and BOWL Old

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

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

Diversification Opportunities for Johnson Outdoors and BOWL Old

0.69

Correlation Coefficient

Johnson Outdoors  BOWL Old

Poor diversification

The 3 months correlation between Johnson and BOWL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Outdoors and BOWL Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOWL Old and Johnson Outdoors 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 Johnson Outdoors 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 Johnson Outdoors i.e., Johnson Outdoors and BOWL Old go up and down completely randomly.

Pair Corralation between Johnson Outdoors and BOWL Old

Given the investment horizon of 90 days Johnson Outdoors is expected to under-perform the BOWL Old. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Outdoors is 1.33 times less risky than BOWL Old. The stock trades about -0.18 of its potential returns per unit of risk. The 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 29, 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 Together
Strength	Significant
Accuracy	50.82%
Values	Daily Returns

Johnson Outdoors  vs.  BOWL Old

Johnson Outdoors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Johnson Outdoors and BOWL Old

The main advantage of trading using opposite Johnson Outdoors and BOWL Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Outdoors 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 Johnson Outdoors 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..