Can any of the company-specific risk be diversified away by investing in both Boqii Holding and Ihuman 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 Boqii Holding and Ihuman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boqii Holding Limited and Ihuman Inc, you can compare the effects of market volatilities on Boqii Holding and Ihuman 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 Boqii Holding with a short position of Ihuman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boqii Holding and Ihuman.
Diversification Opportunities for Boqii Holding and Ihuman
The 3 months correlation between Boqii and Ihuman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Boqii Holding Limited and Ihuman Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ihuman Inc and Boqii Holding 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 Boqii Holding Limited are associated (or correlated) with Ihuman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ihuman Inc has no effect on the direction of Boqii Holding i.e., Boqii Holding and Ihuman go up and down completely randomly.
Allowing for the 90-day total investment horizon Boqii Holding Limited is expected to generate 2.83 times more return on investment than Ihuman. However, Boqii Holding is 2.83 times more volatile than Ihuman Inc. It trades about 0.22 of its potential returns per unit of risk. Ihuman Inc is currently generating about 0.15 per unit of risk. If you would invest 32.00 in Boqii Holding Limited on March 6, 2024 and sell it today you would earn a total of 12.50 from holding Boqii Holding Limited or generate 39.06% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Boqii Holding Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Boqii Holding reported solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Ihuman Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Ihuman is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.