Correlation Between Standard Foods and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Standard Foods 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 Standard Foods and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Foods Corp and Basso Industry Corp, you can compare the effects of market volatilities on Standard Foods 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 Standard Foods with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Basso Industry.
Diversification Opportunities for Standard Foods and Basso Industry
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Standard and Basso is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp 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 Standard Foods 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 Standard Foods Corp 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 Standard Foods i.e., Standard Foods and Basso Industry go up and down completely randomly.
Pair Corralation between Standard Foods and Basso Industry
Assuming the 90 days trading horizon Standard Foods Corp is expected to generate 0.51 times more return on investment than Basso Industry. However, Standard Foods Corp is 1.95 times less risky than Basso Industry. It trades about -0.05 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 3,780 in Standard Foods Corp on September 2, 2024 and sell it today you would lose (25.00) from holding Standard Foods Corp or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Foods Corp vs. Basso Industry Corp
Performance |
| Timeline |
| Standard Foods Corp |
| Basso Industry Corp |
Standard Foods and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Basso Industry
The main advantage of trading using opposite Standard Foods and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods 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.| Standard Foods vs. Uni President Enterprises Corp | Standard Foods vs. TTET Union Corp | Standard Foods vs. President Chain Store | Standard Foods vs. Charoen Pokphand Enterprise |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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