Correlation Between Bomin Electronics and Hangzhou Weiguang

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

Diversification Opportunities for Bomin Electronics and Hangzhou Weiguang

0.69

Correlation Coefficient

Bomin Electronics  Hangzhou Weiguang

Poor diversification

The 3 months correlation between Bomin and Hangzhou is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Hangzhou Weiguang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Weiguang 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 Hangzhou Weiguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Weiguang has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Hangzhou Weiguang go up and down completely randomly.

Pair Corralation between Bomin Electronics and Hangzhou Weiguang

Assuming the 90 days trading horizon Bomin Electronics is expected to generate 1.78 times less return on investment than Hangzhou Weiguang. In addition to that, Bomin Electronics is 1.07 times more volatile than Hangzhou Weiguang Electronic. It trades about 0.08 of its total potential returns per unit of risk. Hangzhou Weiguang Electronic is currently generating about 0.15 per unit of volatility. If you would invest  1,757  in Hangzhou Weiguang Electronic on September 21, 2024 and sell it today you would earn a total of  778.00  from holding Hangzhou Weiguang Electronic or generate 44.28% return on investment over 90 days.

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

Bomin Electronics Co  vs.  Hangzhou Weiguang Electronic

Bomin Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bomin Electronics Co are ranked lower than 11 (%) 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.

Hangzhou Weiguang

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Bomin Electronics and Hangzhou Weiguang

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

The idea behind Bomin Electronics Co and Hangzhou Weiguang Electronic 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.