Correlation Between Bomin Electronics and Ningbo Homelink

Can any of the company-specific risk be diversified away by investing in both Bomin Electronics and Ningbo Homelink 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 Ningbo Homelink 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 Ningbo Homelink Eco iTech, you can compare the effects of market volatilities on Bomin Electronics and Ningbo Homelink 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 Ningbo Homelink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bomin Electronics and Ningbo Homelink.

Diversification Opportunities for Bomin Electronics and Ningbo Homelink

0.65

Correlation Coefficient

Bomin Electronics  Ningbo Homelink

Poor diversification

The 3 months correlation between Bomin and Ningbo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Ningbo Homelink Eco iTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Homelink Eco 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 Ningbo Homelink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Homelink Eco has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Ningbo Homelink go up and down completely randomly.

Pair Corralation between Bomin Electronics and Ningbo Homelink

Assuming the 90 days trading horizon Bomin Electronics Co is expected to under-perform the Ningbo Homelink. In addition to that, Bomin Electronics is 1.08 times more volatile than Ningbo Homelink Eco iTech. It trades about -0.02 of its total potential returns per unit of risk. Ningbo Homelink Eco iTech is currently generating about 0.0 per unit of volatility. If you would invest  2,160  in Ningbo Homelink Eco iTech on December 2, 2024 and sell it today you would lose (397.00) from holding Ningbo Homelink Eco iTech or give up 18.38% of portfolio value over 90 days.

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

Bomin Electronics Co  vs.  Ningbo Homelink Eco iTech

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.

Ningbo Homelink Eco

Risk-Adjusted Performance

Weak

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

Pair Trading with Bomin Electronics and Ningbo Homelink

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

The idea behind Bomin Electronics Co and Ningbo Homelink Eco iTech 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.