Correlation Between Bowlin Travel and Caseys General

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

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

Diversification Opportunities for Bowlin Travel and Caseys General

-0.52

Correlation Coefficient

Bowlin Travel  Caseys General

Excellent diversification

The 3 months correlation between Bowlin and Caseys is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bowlin Travel Centers and Caseys General Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caseys General Stores and Bowlin Travel 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 Bowlin Travel Centers are associated (or correlated) with Caseys General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caseys General Stores has no effect on the direction of Bowlin Travel i.e., Bowlin Travel and Caseys General go up and down completely randomly.

Pair Corralation between Bowlin Travel and Caseys General

Given the investment horizon of 90 days Bowlin Travel is expected to generate 5.58 times less return on investment than Caseys General. In addition to that, Bowlin Travel is 2.12 times more volatile than Caseys General Stores. It trades about 0.01 of its total potential returns per unit of risk. Caseys General Stores is currently generating about 0.08 per unit of volatility. If you would invest  19,732  in Caseys General Stores on February 9, 2024 and sell it today you would earn a total of  13,254  from holding Caseys General Stores or generate 67.17% return on investment over 90 days.

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

Bowlin Travel Centers  vs.  Caseys General Stores

Bowlin Travel Centers

Risk-Adjusted Performance

0 of 100

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.

Caseys General Stores

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caseys General showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bowlin Travel and Caseys General

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

The idea behind Bowlin Travel Centers and Caseys General Stores 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.