Correlation Between Shanghai Pudong and Bomesc Offshore

Can any of the company-specific risk be diversified away by investing in both Shanghai Pudong and Bomesc Offshore 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 Shanghai Pudong and Bomesc Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Pudong Development and Bomesc Offshore Engineering, you can compare the effects of market volatilities on Shanghai Pudong and Bomesc Offshore 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 Shanghai Pudong with a short position of Bomesc Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Pudong and Bomesc Offshore.

Diversification Opportunities for Shanghai Pudong and Bomesc Offshore

-0.47

Correlation Coefficient

Shanghai Pudong  Bomesc Offshore

Very good diversification

The 3 months correlation between Shanghai and Bomesc is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Pudong Development and Bomesc Offshore Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bomesc Offshore Engi and Shanghai Pudong 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 Shanghai Pudong Development are associated (or correlated) with Bomesc Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bomesc Offshore Engi has no effect on the direction of Shanghai Pudong i.e., Shanghai Pudong and Bomesc Offshore go up and down completely randomly.

Pair Corralation between Shanghai Pudong and Bomesc Offshore

Assuming the 90 days trading horizon Shanghai Pudong Development is expected to generate 0.94 times more return on investment than Bomesc Offshore. However, Shanghai Pudong Development is 1.06 times less risky than Bomesc Offshore. It trades about 0.14 of its potential returns per unit of risk. Bomesc Offshore Engineering is currently generating about -0.4 per unit of risk. If you would invest  966.00  in Shanghai Pudong Development on October 8, 2024 and sell it today you would earn a total of  40.00  from holding Shanghai Pudong Development or generate 4.14% return on investment over 90 days.

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

Shanghai Pudong Development  vs.  Bomesc Offshore Engineering

Shanghai Pudong Deve

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bomesc Offshore Engi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bomesc Offshore Engineering 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 Shanghai Pudong and Bomesc Offshore

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

The idea behind Shanghai Pudong Development and Bomesc Offshore Engineering 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.