Correlation Between Bosera CMSK and Dongxing Sec

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

Diversification Opportunities for Bosera CMSK and Dongxing Sec

-0.01

Correlation Coefficient

Bosera CMSK  Dongxing Sec

Good diversification

The 3 months correlation between Bosera and Dongxing is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bosera CMSK Industrial and Dongxing Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongxing Sec 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 Dongxing Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongxing Sec has no effect on the direction of Bosera CMSK i.e., Bosera CMSK and Dongxing Sec go up and down completely randomly.

Pair Corralation between Bosera CMSK and Dongxing Sec

Assuming the 90 days trading horizon Bosera CMSK Industrial is expected to under-perform the Dongxing Sec. But the stock apears to be less risky and, when comparing its historical volatility, Bosera CMSK Industrial is 1.74 times less risky than Dongxing Sec. The stock trades about -0.04 of its potential returns per unit of risk. The Dongxing Sec Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  823.00  in Dongxing Sec Co on October 5, 2024 and sell it today you would earn a total of  212.00  from holding Dongxing Sec Co or generate 25.76% 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.  Dongxing Sec Co

Bosera CMSK Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bosera CMSK Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Dongxing Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongxing Sec 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 Bosera CMSK and Dongxing Sec

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

The idea behind Bosera CMSK Industrial and Dongxing Sec 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.