Correlation Between Bomesc Offshore and Zhongyin Babi

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

Diversification Opportunities for Bomesc Offshore and Zhongyin Babi

0.62

Correlation Coefficient

Bomesc Offshore  Zhongyin Babi

Poor diversification

The 3 months correlation between Bomesc and Zhongyin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bomesc Offshore Engineering and Zhongyin Babi Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongyin Babi Food 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 Zhongyin Babi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongyin Babi Food has no effect on the direction of Bomesc Offshore i.e., Bomesc Offshore and Zhongyin Babi go up and down completely randomly.

Pair Corralation between Bomesc Offshore and Zhongyin Babi

Assuming the 90 days trading horizon Bomesc Offshore Engineering is expected to under-perform the Zhongyin Babi. But the stock apears to be less risky and, when comparing its historical volatility, Bomesc Offshore Engineering is 1.6 times less risky than Zhongyin Babi. The stock trades about -0.03 of its potential returns per unit of risk. The Zhongyin Babi Food is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,548  in Zhongyin Babi Food on October 14, 2024 and sell it today you would earn a total of  70.00  from holding Zhongyin Babi Food or generate 4.52% return on investment over 90 days.

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

Bomesc Offshore Engineering  vs.  Zhongyin Babi Food

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 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.

Zhongyin Babi Food

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongyin Babi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bomesc Offshore and Zhongyin Babi

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

The idea behind Bomesc Offshore Engineering and Zhongyin Babi Food 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.