Correlation Between Bosch and Elin Electronics

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

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

Diversification Opportunities for Bosch and Elin Electronics

0.74

Correlation Coefficient

Bosch  Elin Electronics

Poor diversification

The 3 months correlation between Bosch and Elin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics and Bosch 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 Bosch Limited are associated (or correlated) with Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of Bosch i.e., Bosch and Elin Electronics go up and down completely randomly.

Pair Corralation between Bosch and Elin Electronics

Assuming the 90 days trading horizon Bosch Limited is expected to generate 0.52 times more return on investment than Elin Electronics. However, Bosch Limited is 1.92 times less risky than Elin Electronics. It trades about -0.18 of its potential returns per unit of risk. Elin Electronics Limited is currently generating about -0.11 per unit of risk. If you would invest  3,612,330  in Bosch Limited on October 26, 2024 and sell it today you would lose (514,090) from holding Bosch Limited or give up 14.23% of portfolio value over 90 days.

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

Bosch Limited  vs.  Elin Electronics Limited

Bosch Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bosch Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bosch and Elin Electronics

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

The idea behind Bosch Limited and Elin Electronics Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.