Correlation Between Baotek Industrial and Elite Material
Can any of the company-specific risk be diversified away by investing in both Baotek Industrial and Elite Material 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 Baotek Industrial and Elite Material into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baotek Industrial Materials and Elite Material Co, you can compare the effects of market volatilities on Baotek Industrial and Elite Material 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 Baotek Industrial with a short position of Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baotek Industrial and Elite Material.
Diversification Opportunities for Baotek Industrial and Elite Material
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Baotek and Elite is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material and Baotek Industrial 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 Baotek Industrial Materials are associated (or correlated) with Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and Elite Material go up and down completely randomly.
Pair Corralation between Baotek Industrial and Elite Material
Assuming the 90 days trading horizon Baotek Industrial is expected to generate 1.64 times less return on investment than Elite Material. In addition to that, Baotek Industrial is 1.47 times more volatile than Elite Material Co. It trades about 0.1 of its total potential returns per unit of risk. Elite Material Co is currently generating about 0.25 per unit of volatility. If you would invest 42,000 in Elite Material Co on August 30, 2024 and sell it today you would earn a total of 4,750 from holding Elite Material Co or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baotek Industrial Materials vs. Elite Material Co
Performance |
| Timeline |
| Baotek Industrial |
| Elite Material |
Baotek Industrial and Elite Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baotek Industrial and Elite Material
The main advantage of trading using opposite Baotek Industrial and Elite Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baotek Industrial position performs unexpectedly, Elite Material 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 Elite Material will offset losses from the drop in Elite Material's long position.| Baotek Industrial vs. Far Eastern New | Baotek Industrial vs. Eclat Textile Co | Baotek Industrial vs. Ruentex Industries | Baotek Industrial vs. Formosa Taffeta 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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