Correlation Between Shandong Sino and Bomin Electronics

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

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

Diversification Opportunities for Shandong Sino and Bomin Electronics

0.36

Correlation Coefficient

Shandong Sino  Bomin Electronics

Weak diversification

The 3 months correlation between Shandong and Bomin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Sino Agri United and Bomin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomin Electronics and Shandong Sino 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 Shandong Sino Agri United 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 Shandong Sino i.e., Shandong Sino and Bomin Electronics go up and down completely randomly.

Pair Corralation between Shandong Sino and Bomin Electronics

Assuming the 90 days trading horizon Shandong Sino Agri United is expected to under-perform the Bomin Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Sino Agri United is 1.11 times less risky than Bomin Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The Bomin Electronics Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  774.00  in Bomin Electronics Co on December 1, 2024 and sell it today you would earn a total of  53.00  from holding Bomin Electronics Co or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Shandong Sino Agri United  vs.  Bomin Electronics Co

Shandong Sino Agri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Sino Agri United has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bomin Electronics

Risk-Adjusted Performance

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 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 Shandong Sino and Bomin Electronics

The main advantage of trading using opposite Shandong Sino and Bomin Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Sino 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 Shandong Sino Agri United 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.