Correlation Between Henan Shenhuo and Bomin Electronics

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

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

Diversification Opportunities for Henan Shenhuo and Bomin Electronics

-0.24

Correlation Coefficient

Henan Shenhuo  Bomin Electronics

Very good diversification

The 3 months correlation between Henan and Bomin is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shenhuo Coal and Bomin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomin Electronics and Henan Shenhuo 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 Henan Shenhuo Coal 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 Henan Shenhuo i.e., Henan Shenhuo and Bomin Electronics go up and down completely randomly.

Pair Corralation between Henan Shenhuo and Bomin Electronics

Assuming the 90 days trading horizon Henan Shenhuo is expected to generate 1.14 times less return on investment than Bomin Electronics. But when comparing it to its historical volatility, Henan Shenhuo Coal is 1.08 times less risky than Bomin Electronics. It trades about 0.22 of its potential returns per unit of risk. Bomin Electronics Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  728.00  in Bomin Electronics Co on December 11, 2024 and sell it today you would earn a total of  164.00  from holding Bomin Electronics Co or generate 22.53% return on investment over 90 days.

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

Henan Shenhuo Coal  vs.  Bomin Electronics Co

Henan Shenhuo Coal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shenhuo Coal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shenhuo sustained solid returns over the last few months and may actually be approaching a breakup point.

Bomin Electronics

Risk-Adjusted Performance

Weak

Over the last 90 days Bomin Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bomin Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Henan Shenhuo and Bomin Electronics

The main advantage of trading using opposite Henan Shenhuo and Bomin Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henan Shenhuo 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 Henan Shenhuo Coal 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.