Correlation Between Bosera CMSK and China Everbright

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

Diversification Opportunities for Bosera CMSK and China Everbright

0.63

Correlation Coefficient

Bosera CMSK  China Everbright

Poor diversification

The 3 months correlation between Bosera and China is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bosera CMSK Industrial and China Everbright Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Bank 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 China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Bank has no effect on the direction of Bosera CMSK i.e., Bosera CMSK and China Everbright go up and down completely randomly.

Pair Corralation between Bosera CMSK and China Everbright

Assuming the 90 days trading horizon Bosera CMSK Industrial is expected to generate 0.61 times more return on investment than China Everbright. However, Bosera CMSK Industrial is 1.64 times less risky than China Everbright. It trades about 0.35 of its potential returns per unit of risk. China Everbright Bank is currently generating about 0.0 per unit of risk. If you would invest  194.00  in Bosera CMSK Industrial on October 10, 2024 and sell it today you would earn a total of  13.00  from holding Bosera CMSK Industrial or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Bosera CMSK Industrial  vs.  China Everbright Bank

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.

China Everbright Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Everbright 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 China Everbright

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

The idea behind Bosera CMSK Industrial and China Everbright Bank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.