Correlation Between Bomin Electronics and Sanan Optoelectronics

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

Diversification Opportunities for Bomin Electronics and Sanan Optoelectronics

0.97

Correlation Coefficient

Bomin Electronics  Sanan Optoelectronics

Almost no diversification

The 3 months correlation between Bomin and Sanan is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bomin Electronics Co and Sanan Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanan Optoelectronics 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 Sanan Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanan Optoelectronics has no effect on the direction of Bomin Electronics i.e., Bomin Electronics and Sanan Optoelectronics go up and down completely randomly.

Pair Corralation between Bomin Electronics and Sanan Optoelectronics

Assuming the 90 days trading horizon Bomin Electronics Co is expected to generate 1.54 times more return on investment than Sanan Optoelectronics. However, Bomin Electronics is 1.54 times more volatile than Sanan Optoelectronics Co. It trades about 0.02 of its potential returns per unit of risk. Sanan Optoelectronics Co is currently generating about -0.23 per unit of risk. If you would invest  898.00  in Bomin Electronics Co on September 21, 2024 and sell it today you would earn a total of  6.00  from holding Bomin Electronics Co or generate 0.67% return on investment over 90 days.

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

Bomin Electronics Co  vs.  Sanan Optoelectronics Co

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.

Sanan Optoelectronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sanan Optoelectronics Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanan Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bomin Electronics and Sanan Optoelectronics

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

The idea behind Bomin Electronics Co and Sanan Optoelectronics Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.