Correlation Between Bonso Electronics and Garmin

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

By analyzing existing cross correlation between Bonso Electronics International and Garmin, you can compare the effects of market volatilities on Bonso Electronics and Garmin 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 Bonso Electronics with a short position of Garmin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bonso Electronics and Garmin.

Diversification Opportunities for Bonso Electronics and Garmin

0.46

Correlation Coefficient

Bonso Electronics  Garmin

Very weak diversification

The 3 months correlation between Bonso and Garmin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bonso Electronics Internationa and Garmin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garmin and Bonso 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 Bonso Electronics International are associated (or correlated) with Garmin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garmin has no effect on the direction of Bonso Electronics i.e., Bonso Electronics and Garmin go up and down completely randomly.

Pair Corralation between Bonso Electronics and Garmin

Given the investment horizon of 90 days Bonso Electronics International is expected to generate 6.16 times more return on investment than Garmin. However, Bonso Electronics is 6.16 times more volatile than Garmin. It trades about 0.04 of its potential returns per unit of risk. Garmin is currently generating about 0.04 per unit of risk. If you would invest  286.00  in Bonso Electronics International on January 24, 2024 and sell it today you would lose (27.00) from holding Bonso Electronics International or give up 9.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	68.02%
Values	Daily Returns

Bonso Electronics Internationa  vs.  Garmin

Bonso Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bonso Electronics International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bonso Electronics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Garmin

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bonso Electronics and Garmin

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

The idea behind Bonso Electronics International and Garmin 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.