Correlation Between Curtiss Wright and Bonso Electronics

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

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

Diversification Opportunities for Curtiss Wright and Bonso Electronics

0.23

Correlation Coefficient

Curtiss Wright  Bonso Electronics

Modest diversification

The 3 months correlation between Curtiss and Bonso is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Wright and Bonso Electronics Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonso Electronics and Curtiss Wright 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 Curtiss Wright are associated (or correlated) with Bonso Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonso Electronics has no effect on the direction of Curtiss Wright i.e., Curtiss Wright and Bonso Electronics go up and down completely randomly.

Pair Corralation between Curtiss Wright and Bonso Electronics

Allowing for the 90-day total investment horizon Curtiss Wright is expected to generate 18.16 times less return on investment than Bonso Electronics. But when comparing it to its historical volatility, Curtiss Wright is 16.34 times less risky than Bonso Electronics. It trades about 0.16 of its potential returns per unit of risk. Bonso Electronics International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Bonso Electronics International on January 25, 2024 and sell it today you would earn a total of  141.00  from holding Bonso Electronics International or generate 119.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	22.71%
Values	Daily Returns

Curtiss Wright  vs.  Bonso Electronics Internationa

Curtiss Wright

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Curtiss Wright may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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.

Pair Trading with Curtiss Wright and Bonso Electronics

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

The idea behind Curtiss Wright and Bonso Electronics International 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 Global Correlations module to find global opportunities by holding instruments from different markets.