Correlation Between Renergen and Bowler Metcalf

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

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

Diversification Opportunities for Renergen and Bowler Metcalf

-0.37

Correlation Coefficient

Renergen  Bowler Metcalf

Very good diversification

The 3 months correlation between Renergen and Bowler is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Renergen and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf and Renergen 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 Renergen are associated (or correlated) with Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of Renergen i.e., Renergen and Bowler Metcalf go up and down completely randomly.

Pair Corralation between Renergen and Bowler Metcalf

Assuming the 90 days trading horizon Renergen is expected to under-perform the Bowler Metcalf. But the stock apears to be less risky and, when comparing its historical volatility, Renergen is 1.3 times less risky than Bowler Metcalf. The stock trades about -0.14 of its potential returns per unit of risk. The Bowler Metcalf is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  120,600  in Bowler Metcalf on September 13, 2024 and sell it today you would earn a total of  9,400  from holding Bowler Metcalf or generate 7.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Renergen  vs.  Bowler Metcalf

Renergen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bowler Metcalf

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Renergen and Bowler Metcalf

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

The idea behind Renergen and Bowler Metcalf 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.