Correlation Between Bomin Electronics and Biwin Storage

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

Diversification Opportunities for Bomin Electronics and Biwin Storage

0.45

Correlation Coefficient

Bomin Electronics  Biwin Storage

Very weak diversification

The 3 months correlation between Bomin and Biwin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Biwin Storage Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biwin Storage Technology 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 Biwin Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biwin Storage Technology has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Biwin Storage go up and down completely randomly.

Pair Corralation between Bomin Electronics and Biwin Storage

Assuming the 90 days trading horizon Bomin Electronics Co is expected to under-perform the Biwin Storage. In addition to that, Bomin Electronics is 1.0 times more volatile than Biwin Storage Technology. It trades about -0.18 of its total potential returns per unit of risk. Biwin Storage Technology is currently generating about 0.02 per unit of volatility. If you would invest  5,829  in Biwin Storage Technology on October 10, 2024 and sell it today you would earn a total of  31.00  from holding Biwin Storage Technology or generate 0.53% return on investment over 90 days.

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

Bomin Electronics Co  vs.  Biwin Storage Technology

Bomin Electronics

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Biwin Storage Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biwin Storage Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bomin Electronics and Biwin Storage

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

The idea behind Bomin Electronics Co and Biwin Storage Technology 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.