Correlation Between Basso Industry and Shih Wei
Can any of the company-specific risk be diversified away by investing in both Basso Industry and Shih Wei 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 Shih Wei 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 Shih Wei Navigation, you can compare the effects of market volatilities on Basso Industry and Shih Wei 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 Shih Wei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basso Industry and Shih Wei.
Diversification Opportunities for Basso Industry and Shih Wei
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Basso and Shih is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Basso Industry Corp and Shih Wei Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shih Wei Navigation 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 Shih Wei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shih Wei Navigation has no effect on the direction of Basso Industry i.e., Basso Industry and Shih Wei go up and down completely randomly.
Pair Corralation between Basso Industry and Shih Wei
Assuming the 90 days trading horizon Basso Industry Corp is expected to generate 0.58 times more return on investment than Shih Wei. However, Basso Industry Corp is 1.72 times less risky than Shih Wei. It trades about 0.12 of its potential returns per unit of risk. Shih Wei Navigation is currently generating about -0.13 per unit of risk. If you would invest 4,135 in Basso Industry Corp on November 8, 2024 and sell it today you would earn a total of 85.00 from holding Basso Industry Corp or generate 2.06% 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. Shih Wei Navigation
Performance |
| Timeline |
| Basso Industry Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shih Wei Navigation |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Basso Industry and Shih Wei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basso Industry and Shih Wei
The main advantage of trading using opposite Basso Industry and Shih Wei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basso Industry position performs unexpectedly, Shih Wei 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 Shih Wei will offset losses from the drop in Shih Wei's long position.The idea behind Basso Industry Corp and Shih Wei Navigation 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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