Correlation Between Bosera CMSK and Lianhe Chemical

Can any of the company-specific risk be diversified away by investing in both Bosera CMSK and Lianhe Chemical 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 Bosera CMSK and Lianhe Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bosera CMSK Industrial and Lianhe Chemical Technology, you can compare the effects of market volatilities on Bosera CMSK and Lianhe Chemical 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 Bosera CMSK with a short position of Lianhe Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bosera CMSK and Lianhe Chemical.

Diversification Opportunities for Bosera CMSK and Lianhe Chemical

-0.39

Correlation Coefficient

Bosera CMSK  Lianhe Chemical

Very good diversification

The 3 months correlation between Bosera and Lianhe is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bosera CMSK Industrial and Lianhe Chemical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lianhe Chemical Tech and Bosera CMSK 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 Bosera CMSK Industrial are associated (or correlated) with Lianhe Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lianhe Chemical Tech has no effect on the direction of Bosera CMSK i.e., Bosera CMSK and Lianhe Chemical go up and down completely randomly.

Pair Corralation between Bosera CMSK and Lianhe Chemical

Assuming the 90 days trading horizon Bosera CMSK Industrial is expected to generate 0.33 times more return on investment than Lianhe Chemical. However, Bosera CMSK Industrial is 3.04 times less risky than Lianhe Chemical. It trades about 0.12 of its potential returns per unit of risk. Lianhe Chemical Technology is currently generating about -0.03 per unit of risk. If you would invest  197.00  in Bosera CMSK Industrial on October 10, 2024 and sell it today you would earn a total of  10.00  from holding Bosera CMSK Industrial or generate 5.08% return on investment over 90 days.

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

Bosera CMSK Industrial  vs.  Lianhe Chemical Technology

Bosera CMSK Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bosera CMSK Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bosera CMSK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lianhe Chemical Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bosera CMSK and Lianhe Chemical

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

The idea behind Bosera CMSK Industrial and Lianhe Chemical Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.