Correlation Between Bomin Electronics and Hang Xiao

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

Diversification Opportunities for Bomin Electronics and Hang Xiao

0.95

Correlation Coefficient

Bomin Electronics  Hang Xiao

Almost no diversification

The 3 months correlation between Bomin and Hang is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Hang Xiao Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Xiao Steel 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 Hang Xiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Xiao Steel has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Hang Xiao go up and down completely randomly.

Pair Corralation between Bomin Electronics and Hang Xiao

Assuming the 90 days trading horizon Bomin Electronics is expected to generate 1.06 times less return on investment than Hang Xiao. In addition to that, Bomin Electronics is 1.05 times more volatile than Hang Xiao Steel. It trades about 0.19 of its total potential returns per unit of risk. Hang Xiao Steel is currently generating about 0.22 per unit of volatility. If you would invest  214.00  in Hang Xiao Steel on September 14, 2024 and sell it today you would earn a total of  90.00  from holding Hang Xiao Steel or generate 42.06% return on investment over 90 days.

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

Bomin Electronics Co  vs.  Hang Xiao Steel

Bomin Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bomin Electronics Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bomin Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Hang Xiao Steel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Xiao Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hang Xiao sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bomin Electronics and Hang Xiao

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

The idea behind Bomin Electronics Co and Hang Xiao Steel 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.