Correlation Between Basso Industry and Standard Foods
Can any of the company-specific risk be diversified away by investing in both Basso Industry and Standard Foods 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 Basso Industry and Standard Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basso Industry Corp and Standard Foods Corp, you can compare the effects of market volatilities on Basso Industry and Standard Foods 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 Basso Industry with a short position of Standard Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basso Industry and Standard Foods.
Diversification Opportunities for Basso Industry and Standard Foods
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Basso and Standard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Basso Industry Corp and Standard Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Foods Corp and Basso Industry 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 Basso Industry Corp are associated (or correlated) with Standard Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Foods Corp has no effect on the direction of Basso Industry i.e., Basso Industry and Standard Foods go up and down completely randomly.
Pair Corralation between Basso Industry and Standard Foods
Assuming the 90 days trading horizon Basso Industry Corp is expected to generate 1.49 times more return on investment than Standard Foods. However, Basso Industry is 1.49 times more volatile than Standard Foods Corp. It trades about 0.42 of its potential returns per unit of risk. Standard Foods Corp is currently generating about 0.26 per unit of risk. If you would invest 4,155 in Basso Industry Corp on November 28, 2024 and sell it today you would earn a total of 220.00 from holding Basso Industry Corp or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basso Industry Corp vs. Standard Foods Corp
Performance |
| Timeline |
| Basso Industry Corp |
| Standard Foods Corp |
Basso Industry and Standard Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basso Industry and Standard Foods
The main advantage of trading using opposite Basso Industry and Standard Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basso Industry position performs unexpectedly, Standard Foods 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 Standard Foods will offset losses from the drop in Standard Foods' long position.| Basso Industry vs. Cheng Shin Rubber | Basso Industry vs. Kung Long Batteries | Basso Industry vs. Pou Chen Corp | Basso Industry vs. China Steel Chemical |
| 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 |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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