Correlation Between Transport and South Basic
Can any of the company-specific risk be diversified away by investing in both Transport and South Basic 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 Transport and South Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transport and Industry and South Basic Chemicals, you can compare the effects of market volatilities on Transport and South Basic 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 Transport with a short position of South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and South Basic.
Diversification Opportunities for Transport and South Basic
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Transport and South is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals and Transport 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 Transport and Industry are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of Transport i.e., Transport and South Basic go up and down completely randomly.
Pair Corralation between Transport and South Basic
Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the South Basic. But the stock apears to be less risky and, when comparing its historical volatility, Transport and Industry is 1.33 times less risky than South Basic. The stock trades about -0.21 of its potential returns per unit of risk. The South Basic Chemicals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,630,000 in South Basic Chemicals on September 2, 2024 and sell it today you would earn a total of 90,000 from holding South Basic Chemicals or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transport and Industry vs. South Basic Chemicals
Performance |
| Timeline |
| Transport and Industry |
| South Basic Chemicals |
Transport and South Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transport and South Basic
The main advantage of trading using opposite Transport and South Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport position performs unexpectedly, South Basic 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 South Basic will offset losses from the drop in South Basic's long position.| Transport vs. Tienlen Steel Corp | Transport vs. PVI Reinsurance Corp | Transport vs. Vietnam National Reinsurance | Transport vs. CEO Group JSC |
| South Basic vs. Vu Dang Investment | South Basic vs. Thanh Dat Investment | South Basic vs. DOMESCO Medical Import | South Basic vs. Tien Giang 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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