Correlation Between Bosch and Electronics Mart

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

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

Diversification Opportunities for Bosch and Electronics Mart

0.87

Correlation Coefficient

Bosch  Electronics Mart

Very poor diversification

The 3 months correlation between Bosch and Electronics is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited and Electronics Mart India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronics Mart India 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 Electronics Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronics Mart India has no effect on the direction of Bosch i.e., Bosch and Electronics Mart go up and down completely randomly.

Pair Corralation between Bosch and Electronics Mart

Assuming the 90 days trading horizon Bosch is expected to generate 1.26 times less return on investment than Electronics Mart. But when comparing it to its historical volatility, Bosch Limited is 1.99 times less risky than Electronics Mart. It trades about 0.12 of its potential returns per unit of risk. Electronics Mart India is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,570  in Electronics Mart India on October 6, 2024 and sell it today you would earn a total of  8,891  from holding Electronics Mart India or generate 117.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Bosch Limited  vs.  Electronics Mart India

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 latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Electronics Mart India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronics Mart India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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 Electronics Mart

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

The idea behind Bosch Limited and Electronics Mart India 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.