Correlation Between Crayon Group and Bouvet

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

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

Diversification Opportunities for Crayon Group and Bouvet

-0.06

Correlation Coefficient

Crayon Group  Bouvet

Good diversification

The 3 months correlation between Crayon and Bouvet is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Crayon Group Holding and Bouvet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bouvet and Crayon Group 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 Crayon Group Holding are associated (or correlated) with Bouvet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bouvet has no effect on the direction of Crayon Group i.e., Crayon Group and Bouvet go up and down completely randomly.

Pair Corralation between Crayon Group and Bouvet

Assuming the 90 days trading horizon Crayon Group Holding is expected to generate 2.74 times more return on investment than Bouvet. However, Crayon Group is 2.74 times more volatile than Bouvet. It trades about 0.06 of its potential returns per unit of risk. Bouvet is currently generating about 0.04 per unit of risk. If you would invest  11,730  in Crayon Group Holding on September 5, 2024 and sell it today you would earn a total of  1,070  from holding Crayon Group Holding or generate 9.12% return on investment over 90 days.

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

Crayon Group Holding  vs.  Bouvet

Crayon Group Holding

Risk-Adjusted Performance

4 of 100

Insignificant

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

Bouvet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bouvet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Bouvet is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Crayon Group and Bouvet

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

The idea behind Crayon Group Holding and Bouvet 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.