Correlation Between I Sheng and Basso Industry
Can any of the company-specific risk be diversified away by investing in both I Sheng 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 I Sheng and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between I Sheng Electric Wire and Basso Industry Corp, you can compare the effects of market volatilities on I Sheng 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 I Sheng with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of I Sheng and Basso Industry.
Diversification Opportunities for I Sheng and Basso Industry
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 6115 and Basso is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding I Sheng Electric Wire 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 I Sheng 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 I Sheng Electric Wire 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 I Sheng i.e., I Sheng and Basso Industry go up and down completely randomly.
Pair Corralation between I Sheng and Basso Industry
Assuming the 90 days trading horizon I Sheng is expected to generate 127.6 times less return on investment than Basso Industry. But when comparing it to its historical volatility, I Sheng Electric Wire is 2.49 times less risky than Basso Industry. It trades about 0.0 of its potential returns per unit of risk. Basso Industry Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,945 in Basso Industry Corp on November 3, 2024 and sell it today you would earn a total of 250.00 from holding Basso Industry Corp or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
I Sheng Electric Wire vs. Basso Industry Corp
Performance |
| Timeline |
| I Sheng Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Basso Industry Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
I Sheng and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with I Sheng and Basso Industry
The main advantage of trading using opposite I Sheng and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if I Sheng 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 I Sheng Electric Wire 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.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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