Correlation Between Bomesc Offshore and Shanghai Shuixing

Can any of the company-specific risk be diversified away by investing in both Bomesc Offshore and Shanghai Shuixing 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 Shanghai Shuixing 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 Shanghai Shuixing Home, you can compare the effects of market volatilities on Bomesc Offshore and Shanghai Shuixing 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 Shanghai Shuixing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bomesc Offshore and Shanghai Shuixing.

Diversification Opportunities for Bomesc Offshore and Shanghai Shuixing

0.86

Correlation Coefficient

Bomesc Offshore  Shanghai Shuixing

Very poor diversification

The 3 months correlation between Bomesc and Shanghai is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bomesc Offshore Engineering and Shanghai Shuixing Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Shuixing Home 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 Shanghai Shuixing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Shuixing Home has no effect on the direction of Bomesc Offshore i.e., Bomesc Offshore and Shanghai Shuixing go up and down completely randomly.

Pair Corralation between Bomesc Offshore and Shanghai Shuixing

Assuming the 90 days trading horizon Bomesc Offshore Engineering is expected to under-perform the Shanghai Shuixing. But the stock apears to be less risky and, when comparing its historical volatility, Bomesc Offshore Engineering is 1.95 times less risky than Shanghai Shuixing. The stock trades about -0.01 of its potential returns per unit of risk. The Shanghai Shuixing Home is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,540  in Shanghai Shuixing Home on September 20, 2024 and sell it today you would earn a total of  53.00  from holding Shanghai Shuixing Home or generate 3.44% return on investment over 90 days.

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

Bomesc Offshore Engineering  vs.  Shanghai Shuixing Home

Bomesc Offshore Engi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bomesc Offshore Engineering are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bomesc Offshore sustained solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Shuixing Home

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Bomesc Offshore and Shanghai Shuixing

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

The idea behind Bomesc Offshore Engineering and Shanghai Shuixing Home 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.