Correlation Between Bomin Electronics and Xiamen CD

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

Diversification Opportunities for Bomin Electronics and Xiamen CD

0.6

Correlation Coefficient

Bomin Electronics  Xiamen CD

Poor diversification

The 3 months correlation between Bomin and Xiamen is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Xiamen CD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen CD 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 Xiamen CD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen CD has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Xiamen CD go up and down completely randomly.

Pair Corralation between Bomin Electronics and Xiamen CD

Assuming the 90 days trading horizon Bomin Electronics Co is expected to under-perform the Xiamen CD. In addition to that, Bomin Electronics is 1.67 times more volatile than Xiamen CD. It trades about -0.03 of its total potential returns per unit of risk. Xiamen CD is currently generating about 0.04 per unit of volatility. If you would invest  1,003  in Xiamen CD on December 2, 2024 and sell it today you would earn a total of  31.00  from holding Xiamen CD or generate 3.09% return on investment over 90 days.

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

Bomin Electronics Co  vs.  Xiamen CD

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.

Xiamen CD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xiamen CD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xiamen CD 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 Xiamen CD

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

The idea behind Bomin Electronics Co and Xiamen CD 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.