Correlation Between Great China and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Great China 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 Great China and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and Basso Industry Corp, you can compare the effects of market volatilities on Great China 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 Great China with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Basso Industry.
Diversification Opportunities for Great China and Basso Industry
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Basso is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal 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 Great China 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 Great China Metal 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 Great China i.e., Great China and Basso Industry go up and down completely randomly.
Pair Corralation between Great China and Basso Industry
Assuming the 90 days trading horizon Great China Metal is expected to under-perform the Basso Industry. But the stock apears to be less risky and, when comparing its historical volatility, Great China Metal is 2.49 times less risky than Basso Industry. The stock trades about -0.01 of its potential returns per unit of risk. The Basso Industry Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,170 in Basso Industry Corp on September 3, 2024 and sell it today you would earn a total of 100.00 from holding Basso Industry Corp or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Great China Metal vs. Basso Industry Corp
Performance |
| Timeline |
| Great China Metal |
| Basso Industry Corp |
Great China and Basso Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and Basso Industry
The main advantage of trading using opposite Great China and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China 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 Great China Metal 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Stocks Directory Find actively traded stocks across global markets |