Correlation Between Bomin Electronics and Jiangsu Xinning

Can any of the company-specific risk be diversified away by investing in both Bomin Electronics and Jiangsu Xinning 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 Bomin Electronics and Jiangsu Xinning into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bomin Electronics Co and Jiangsu Xinning Modern, you can compare the effects of market volatilities on Bomin Electronics and Jiangsu Xinning 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 Bomin Electronics with a short position of Jiangsu Xinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bomin Electronics and Jiangsu Xinning.

Diversification Opportunities for Bomin Electronics and Jiangsu Xinning

0.8

Correlation Coefficient

Bomin Electronics  Jiangsu Xinning

Very poor diversification

The 3 months correlation between Bomin and Jiangsu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Jiangsu Xinning Modern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Xinning Modern and Bomin Electronics 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 Bomin Electronics Co are associated (or correlated) with Jiangsu Xinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Xinning Modern has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Jiangsu Xinning go up and down completely randomly.

Pair Corralation between Bomin Electronics and Jiangsu Xinning

Assuming the 90 days trading horizon Bomin Electronics Co is expected to generate 0.95 times more return on investment than Jiangsu Xinning. However, Bomin Electronics Co is 1.05 times less risky than Jiangsu Xinning. It trades about -0.03 of its potential returns per unit of risk. Jiangsu Xinning Modern is currently generating about -0.08 per unit of risk. If you would invest  888.00  in Bomin Electronics Co on December 2, 2024 and sell it today you would lose (61.00) from holding Bomin Electronics Co or give up 6.87% of portfolio value over 90 days.

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

Bomin Electronics Co  vs.  Jiangsu Xinning Modern

Bomin Electronics

Risk-Adjusted Performance

Very Weak

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

Jiangsu Xinning Modern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangsu Xinning Modern has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bomin Electronics and Jiangsu Xinning

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

The idea behind Bomin Electronics Co and Jiangsu Xinning Modern 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.