Correlation Between Bonso Electronics and Fortive Corp

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

By analyzing existing cross correlation between Bonso Electronics International and Fortive Corp, you can compare the effects of market volatilities on Bonso Electronics and Fortive Corp 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 Bonso Electronics with a short position of Fortive Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bonso Electronics and Fortive Corp.

Diversification Opportunities for Bonso Electronics and Fortive Corp

-0.16

Correlation Coefficient

Bonso Electronics  Fortive Corp

Good diversification

The 3 months correlation between Bonso and Fortive is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bonso Electronics Internationa and Fortive Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortive Corp and Bonso 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 Bonso Electronics International are associated (or correlated) with Fortive Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortive Corp has no effect on the direction of Bonso Electronics i.e., Bonso Electronics and Fortive Corp go up and down completely randomly.

Pair Corralation between Bonso Electronics and Fortive Corp

Given the investment horizon of 90 days Bonso Electronics International is expected to generate 8.37 times more return on investment than Fortive Corp. However, Bonso Electronics is 8.37 times more volatile than Fortive Corp. It trades about 0.03 of its potential returns per unit of risk. Fortive Corp is currently generating about 0.03 per unit of risk. If you would invest  372.00  in Bonso Electronics International on October 11, 2024 and sell it today you would lose (113.00) from holding Bonso Electronics International or give up 30.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.66%
Values	Daily Returns

Bonso Electronics Internationa  vs.  Fortive Corp

Bonso Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonso Electronics International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bonso Electronics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fortive Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortive Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fortive Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bonso Electronics and Fortive Corp

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

The idea behind Bonso Electronics International and Fortive Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.