Correlation Between Bomin Electronics and Northking Information

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

Diversification Opportunities for Bomin Electronics and Northking Information

0.72

Correlation Coefficient

Bomin Electronics  Northking Information

Poor diversification

The 3 months correlation between Bomin and Northking is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Northking Information Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northking Information 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 Northking Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northking Information has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Northking Information go up and down completely randomly.

Pair Corralation between Bomin Electronics and Northking Information

Assuming the 90 days trading horizon Bomin Electronics Co is expected to generate 0.76 times more return on investment than Northking Information. However, Bomin Electronics Co is 1.31 times less risky than Northking Information. It trades about 0.06 of its potential returns per unit of risk. Northking Information Technology is currently generating about 0.04 per unit of risk. If you would invest  836.00  in Bomin Electronics Co on September 30, 2024 and sell it today you would earn a total of  76.00  from holding Bomin Electronics Co or generate 9.09% 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.  Northking Information Technolo

Bomin Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bomin Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bomin Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Northking Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northking Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bomin Electronics and Northking Information

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

The idea behind Bomin Electronics Co and Northking Information 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.