Correlation Between Chun Yuan and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Chun Yuan 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 Chun Yuan and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chun Yuan Steel and Basso Industry Corp, you can compare the effects of market volatilities on Chun Yuan 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 Chun Yuan with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Basso Industry.
Diversification Opportunities for Chun Yuan and Basso Industry
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chun and Basso is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel 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 Chun Yuan 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 Chun Yuan Steel 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 Chun Yuan i.e., Chun Yuan and Basso Industry go up and down completely randomly.
Pair Corralation between Chun Yuan and Basso Industry
Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 1.0 times more return on investment than Basso Industry. However, Chun Yuan is 1.0 times more volatile than Basso Industry Corp. It trades about 0.02 of its potential returns per unit of risk. Basso Industry Corp is currently generating about -0.01 per unit of risk. If you would invest 1,840 in Chun Yuan Steel on September 3, 2024 and sell it today you would earn a total of 5.00 from holding Chun Yuan Steel or generate 0.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chun Yuan Steel vs. Basso Industry Corp
Performance |
| Timeline |
| Chun Yuan Steel |
| Basso Industry Corp |
Chun Yuan and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chun Yuan and Basso Industry
The main advantage of trading using opposite Chun Yuan and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chun Yuan 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.The idea behind Chun Yuan Steel and Basso Industry Corp 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.| Basso Industry vs. Cheng Shin Rubber | Basso Industry vs. Kung Long Batteries | Basso Industry vs. Pou Chen Corp | Basso Industry vs. China Steel Chemical |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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