Correlation Between NETGEAR and Bowlin Travel

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

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

Diversification Opportunities for NETGEAR and Bowlin Travel

0.7

Correlation Coefficient

NETGEAR  Bowlin Travel

Poor diversification

The 3 months correlation between NETGEAR and Bowlin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR 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 NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Bowlin Travel go up and down completely randomly.

Pair Corralation between NETGEAR and Bowlin Travel

Given the investment horizon of 90 days NETGEAR is expected to under-perform the Bowlin Travel. In addition to that, NETGEAR is 2.88 times more volatile than Bowlin Travel Centers. It trades about -0.06 of its total potential returns per unit of risk. Bowlin Travel Centers is currently generating about -0.09 per unit of volatility. If you would invest  400.00  in Bowlin Travel Centers on December 21, 2024 and sell it today you would lose (20.00) from holding Bowlin Travel Centers or give up 5.0% of portfolio value over 90 days.

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

NETGEAR  vs.  Bowlin Travel Centers

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Bowlin Travel Centers

Risk-Adjusted Performance

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 NETGEAR and Bowlin Travel

The main advantage of trading using opposite NETGEAR and Bowlin Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.