Correlation Between China General and Basso Industry
Can any of the company-specific risk be diversified away by investing in both China General 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 China General and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China General Plastics and Basso Industry Corp, you can compare the effects of market volatilities on China General 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 China General with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of China General and Basso Industry.
Diversification Opportunities for China General and Basso Industry
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Basso is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding China General Plastics 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 China General 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 China General Plastics 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 China General i.e., China General and Basso Industry go up and down completely randomly.
Pair Corralation between China General and Basso Industry
Assuming the 90 days trading horizon China General Plastics is expected to under-perform the Basso Industry. In addition to that, China General is 1.29 times more volatile than Basso Industry Corp. It trades about -0.1 of its total potential returns per unit of risk. Basso Industry Corp is currently generating about -0.1 per unit of volatility. If you would invest 4,815 in Basso Industry Corp on August 28, 2024 and sell it today you would lose (490.00) from holding Basso Industry Corp or give up 10.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China General Plastics vs. Basso Industry Corp
Performance |
| Timeline |
| China General Plastics |
| Basso Industry Corp |
China General and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China General and Basso Industry
The main advantage of trading using opposite China General and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China General 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.| China General vs. Cheng Shin Rubber | China General vs. China Steel Chemical | China General vs. Yulon Motor Co |
| Basso Industry vs. Taiwan Semiconductor Manufacturing | Basso Industry vs. Hon Hai Precision | Basso Industry vs. MediaTek | Basso Industry vs. Chunghwa Telecom Co |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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