Correlation Between Bonso Electronics and Sensata Technologies

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

Diversification Opportunities for Bonso Electronics and Sensata Technologies

0.44

Correlation Coefficient

Bonso Electronics  Sensata Technologies

Very weak diversification

The 3 months correlation between Bonso and Sensata is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bonso Electronics Internationa and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies 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 Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of Bonso Electronics i.e., Bonso Electronics and Sensata Technologies go up and down completely randomly.

Pair Corralation between Bonso Electronics and Sensata Technologies

If you would invest  3,367  in Sensata Technologies Holding on January 20, 2024 and sell it today you would lose (16.00) from holding Sensata Technologies Holding or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	2.33%
Values	Daily Returns

Bonso Electronics Internationa  vs.  Sensata Technologies Holding

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.

Sensata Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sensata Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bonso Electronics and Sensata Technologies

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

The idea behind Bonso Electronics International and Sensata Technologies Holding 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.