Correlation Between Guangdong Liantai and Bomesc Offshore

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

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

Diversification Opportunities for Guangdong Liantai and Bomesc Offshore

0.4

Correlation Coefficient

Guangdong Liantai  Bomesc Offshore

Very weak diversification

The 3 months correlation between Guangdong and Bomesc is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta 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 Guangdong Liantai 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 Guangdong Liantai Environmental 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 Guangdong Liantai i.e., Guangdong Liantai and Bomesc Offshore go up and down completely randomly.

Pair Corralation between Guangdong Liantai and Bomesc Offshore

Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to under-perform the Bomesc Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Guangdong Liantai Environmental is 1.46 times less risky than Bomesc Offshore. The stock trades about -0.01 of its potential returns per unit of risk. The Bomesc Offshore Engineering is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,172  in Bomesc Offshore Engineering on December 27, 2024 and sell it today you would earn a total of  315.00  from holding Bomesc Offshore Engineering or generate 26.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Guangdong Liantai Environmenta  vs.  Bomesc Offshore Engineering

Guangdong Liantai

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Liantai Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Liantai 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bomesc Offshore Engineering are ranked lower than 18 (%) 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.

Pair Trading with Guangdong Liantai and Bomesc Offshore

The main advantage of trading using opposite Guangdong Liantai and Bomesc Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Liantai 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 Guangdong Liantai Environmental 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.