Correlation Between Bosera CMSK and Shenzhen Kexin

Can any of the company-specific risk be diversified away by investing in both Bosera CMSK and Shenzhen Kexin 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 Shenzhen Kexin 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 Shenzhen Kexin Communication, you can compare the effects of market volatilities on Bosera CMSK and Shenzhen Kexin 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 Shenzhen Kexin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bosera CMSK and Shenzhen Kexin.

Diversification Opportunities for Bosera CMSK and Shenzhen Kexin

0.03

Correlation Coefficient

Bosera CMSK  Shenzhen Kexin

Significant diversification

The 3 months correlation between Bosera and Shenzhen is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bosera CMSK Industrial and Shenzhen Kexin Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Kexin Commu 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 Shenzhen Kexin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Kexin Commu has no effect on the direction of Bosera CMSK i.e., Bosera CMSK and Shenzhen Kexin go up and down completely randomly.

Pair Corralation between Bosera CMSK and Shenzhen Kexin

Assuming the 90 days trading horizon Bosera CMSK Industrial is expected to generate 0.28 times more return on investment than Shenzhen Kexin. However, Bosera CMSK Industrial is 3.53 times less risky than Shenzhen Kexin. It trades about 0.23 of its potential returns per unit of risk. Shenzhen Kexin Communication is currently generating about 0.01 per unit of risk. If you would invest  201.00  in Bosera CMSK Industrial on December 26, 2024 and sell it today you would earn a total of  32.00  from holding Bosera CMSK Industrial or generate 15.92% return on investment over 90 days.

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

Bosera CMSK Industrial  vs.  Shenzhen Kexin Communication

Bosera CMSK Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bosera CMSK Industrial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bosera CMSK sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Kexin Commu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Kexin Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Kexin 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 Shenzhen Kexin

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

The idea behind Bosera CMSK Industrial and Shenzhen Kexin Communication 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.