Correlation Between Xiangyang Automobile and Bomin Electronics

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

By analyzing existing cross correlation between Xiangyang Automobile Bearing and Bomin Electronics Co, you can compare the effects of market volatilities on Xiangyang Automobile and Bomin Electronics 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 Xiangyang Automobile with a short position of Bomin Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xiangyang Automobile and Bomin Electronics.

Diversification Opportunities for Xiangyang Automobile and Bomin Electronics

0.55

Correlation Coefficient

Xiangyang Automobile  Bomin Electronics

Very weak diversification

The 3 months correlation between Xiangyang and Bomin is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Xiangyang Automobile Bearing and Bomin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomin Electronics and Xiangyang Automobile 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 Xiangyang Automobile Bearing are associated (or correlated) with Bomin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bomin Electronics has no effect on the direction of Xiangyang Automobile i.e., Xiangyang Automobile and Bomin Electronics go up and down completely randomly.

Pair Corralation between Xiangyang Automobile and Bomin Electronics

Assuming the 90 days trading horizon Xiangyang Automobile Bearing is expected to generate 1.1 times more return on investment than Bomin Electronics. However, Xiangyang Automobile is 1.1 times more volatile than Bomin Electronics Co. It trades about 0.02 of its potential returns per unit of risk. Bomin Electronics Co is currently generating about -0.02 per unit of risk. If you would invest  646.00  in Xiangyang Automobile Bearing on October 5, 2024 and sell it today you would earn a total of  6.00  from holding Xiangyang Automobile Bearing or generate 0.93% return on investment over 90 days.

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

Xiangyang Automobile Bearing  vs.  Bomin Electronics Co

Xiangyang Automobile

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xiangyang Automobile Bearing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xiangyang Automobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Bomin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bomin Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Xiangyang Automobile and Bomin Electronics

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

The idea behind Xiangyang Automobile Bearing and Bomin Electronics Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.