Correlation Between Bomesc Offshore and Anhui Huaren

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

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

Diversification Opportunities for Bomesc Offshore and Anhui Huaren

0.68

Correlation Coefficient

Bomesc Offshore  Anhui Huaren

Poor diversification

The 3 months correlation between Bomesc and Anhui is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bomesc Offshore Engineering and Anhui Huaren Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Huaren Health and Bomesc Offshore 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 Bomesc Offshore Engineering are associated (or correlated) with Anhui Huaren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Huaren Health has no effect on the direction of Bomesc Offshore i.e., Bomesc Offshore and Anhui Huaren go up and down completely randomly.

Pair Corralation between Bomesc Offshore and Anhui Huaren

Assuming the 90 days trading horizon Bomesc Offshore Engineering is expected to generate 0.8 times more return on investment than Anhui Huaren. However, Bomesc Offshore Engineering is 1.25 times less risky than Anhui Huaren. It trades about 0.01 of its potential returns per unit of risk. Anhui Huaren Health is currently generating about -0.05 per unit of risk. If you would invest  1,215  in Bomesc Offshore Engineering on October 11, 2024 and sell it today you would lose (81.00) from holding Bomesc Offshore Engineering or give up 6.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.17%
Values	Daily Returns

Bomesc Offshore Engineering  vs.  Anhui Huaren Health

Bomesc Offshore Engi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bomesc Offshore Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bomesc Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Huaren Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bomesc Offshore and Anhui Huaren

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

The idea behind Bomesc Offshore Engineering and Anhui Huaren Health 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.