Correlation Between ReTo Eco and Basanite
Can any of the company-specific risk be diversified away by investing in both ReTo Eco and Basanite 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 ReTo Eco and Basanite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ReTo Eco Solutions and Basanite, you can compare the effects of market volatilities on ReTo Eco and Basanite 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 ReTo Eco with a short position of Basanite. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and Basanite.
Diversification Opportunities for ReTo Eco and Basanite
Good diversification
The 3 months correlation between ReTo and Basanite is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and Basanite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basanite and ReTo Eco 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 ReTo Eco Solutions are associated (or correlated) with Basanite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basanite has no effect on the direction of ReTo Eco i.e., ReTo Eco and Basanite go up and down completely randomly.
Pair Corralation between ReTo Eco and Basanite
Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the Basanite. But the stock apears to be less risky and, when comparing its historical volatility, ReTo Eco Solutions is 2.76 times less risky than Basanite. The stock trades about -0.02 of its potential returns per unit of risk. The Basanite is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 0.90 in Basanite on October 26, 2024 and sell it today you would earn a total of 4.10 from holding Basanite or generate 455.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ReTo Eco Solutions vs. Basanite
Performance |
| Timeline |
| ReTo Eco Solutions |
| Basanite |
ReTo Eco and Basanite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ReTo Eco and Basanite
The main advantage of trading using opposite ReTo Eco and Basanite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReTo Eco position performs unexpectedly, Basanite 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 Basanite will offset losses from the drop in Basanite's long position.| ReTo Eco vs. Martin Marietta Materials | ReTo Eco vs. Vulcan Materials | ReTo Eco vs. Summit Materials | ReTo Eco vs. United States Lime |
| Basanite vs. Xinyi Glass Holdings | Basanite vs. CEMATRIX | Basanite vs. Anhui Conch Cement | Basanite vs. CEMEX SAB de |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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