Correlation Between Nan Pao and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Nan Pao 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 Nan Pao and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nan Pao Resins and Basso Industry Corp, you can compare the effects of market volatilities on Nan Pao 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 Nan Pao with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Pao and Basso Industry.
Diversification Opportunities for Nan Pao and Basso Industry
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nan and Basso is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nan Pao Resins 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 Nan Pao 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 Nan Pao Resins 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 Nan Pao i.e., Nan Pao and Basso Industry go up and down completely randomly.
Pair Corralation between Nan Pao and Basso Industry
Assuming the 90 days trading horizon Nan Pao Resins is expected to generate 2.0 times more return on investment than Basso Industry. However, Nan Pao is 2.0 times more volatile than Basso Industry Corp. It trades about 0.06 of its potential returns per unit of risk. Basso Industry Corp is currently generating about 0.02 per unit of risk. If you would invest 22,650 in Nan Pao Resins on September 3, 2024 and sell it today you would earn a total of 10,500 from holding Nan Pao Resins or generate 46.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Pao Resins vs. Basso Industry Corp
Performance |
| Timeline |
| Nan Pao Resins |
| Basso Industry Corp |
Nan Pao and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Pao and Basso Industry
The main advantage of trading using opposite Nan Pao and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Pao 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.| Nan Pao vs. Hunya Foods Co | Nan Pao vs. Cameo Communications | Nan Pao vs. BenQ Materials Corp | Nan Pao vs. Advanced Echem Materials |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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