Correlation Between Changzhou Almaden and Bomin Electronics

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

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

Diversification Opportunities for Changzhou Almaden and Bomin Electronics

0.81

Correlation Coefficient

Changzhou Almaden  Bomin Electronics

Very poor diversification

The 3 months correlation between Changzhou and Bomin is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and Bomin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomin Electronics and Changzhou Almaden 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 Changzhou Almaden Co 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 Changzhou Almaden i.e., Changzhou Almaden and Bomin Electronics go up and down completely randomly.

Pair Corralation between Changzhou Almaden and Bomin Electronics

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to generate 0.43 times more return on investment than Bomin Electronics. However, Changzhou Almaden Co is 2.35 times less risky than Bomin Electronics. It trades about -0.17 of its potential returns per unit of risk. Bomin Electronics Co is currently generating about -0.12 per unit of risk. If you would invest  1,588  in Changzhou Almaden Co on October 22, 2024 and sell it today you would lose (93.00) from holding Changzhou Almaden Co or give up 5.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Changzhou Almaden Co  vs.  Bomin Electronics Co

Changzhou Almaden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changzhou Almaden 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.

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 Changzhou Almaden and Bomin Electronics

The main advantage of trading using opposite Changzhou Almaden and Bomin Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changzhou Almaden 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 Changzhou Almaden Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.