Correlation Between Great Wall and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Great Wall and Basso Industry 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 Great Wall and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Basso Industry Corp, you can compare the effects of market volatilities on Great Wall and Basso Industry 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 Great Wall with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Basso Industry.
Diversification Opportunities for Great Wall and Basso Industry
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Basso is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Basso Industry Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basso Industry Corp and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Basso Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basso Industry Corp has no effect on the direction of Great Wall i.e., Great Wall and Basso Industry go up and down completely randomly.
Pair Corralation between Great Wall and Basso Industry
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.53 times more return on investment than Basso Industry. However, Great Wall Enterprise is 1.88 times less risky than Basso Industry. It trades about 0.26 of its potential returns per unit of risk. Basso Industry Corp is currently generating about -0.07 per unit of risk. If you would invest 5,160 in Great Wall Enterprise on September 2, 2024 and sell it today you would earn a total of 170.00 from holding Great Wall Enterprise or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Basso Industry Corp
Performance |
| Timeline |
| Great Wall Enterprise |
| Basso Industry Corp |
Great Wall and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Basso Industry
The main advantage of trading using opposite Great Wall and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Basso Industry 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 Basso Industry will offset losses from the drop in Basso Industry's long position.| Great Wall vs. De Licacy Industrial | Great Wall vs. Wisher Industrial Co | Great Wall vs. Tainan Enterprises Co |
| Basso Industry vs. Chaintech Technology Corp | Basso Industry vs. Avision | Basso Industry vs. Clevo Co | Basso Industry vs. Elitegroup Computer Systems |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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