Correlation Between Bosera CMSK and Jiangsu Rongtai

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

Diversification Opportunities for Bosera CMSK and Jiangsu Rongtai

0.75

Correlation Coefficient

Bosera CMSK  Jiangsu Rongtai

Poor diversification

The 3 months correlation between Bosera and Jiangsu is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bosera CMSK Industrial and Jiangsu Rongtai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Rongtai Industry 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 Jiangsu Rongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Rongtai Industry has no effect on the direction of Bosera CMSK i.e., Bosera CMSK and Jiangsu Rongtai go up and down completely randomly.

Pair Corralation between Bosera CMSK and Jiangsu Rongtai

Assuming the 90 days trading horizon Bosera CMSK is expected to generate 2.83 times less return on investment than Jiangsu Rongtai. But when comparing it to its historical volatility, Bosera CMSK Industrial is 3.53 times less risky than Jiangsu Rongtai. It trades about 0.23 of its potential returns per unit of risk. Jiangsu Rongtai Industry is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,397  in Jiangsu Rongtai Industry on December 25, 2024 and sell it today you would earn a total of  1,154  from holding Jiangsu Rongtai Industry or generate 48.14% return on investment over 90 days.

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

Bosera CMSK Industrial  vs.  Jiangsu Rongtai Industry

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 18 (%) 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.

Jiangsu Rongtai Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Rongtai Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Rongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bosera CMSK and Jiangsu Rongtai

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

The idea behind Bosera CMSK Industrial and Jiangsu Rongtai Industry 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.