Correlation Between Southeast Cement and Basso Industry

Can any of the company-specific risk be diversified away by investing in both Southeast Cement 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 Southeast Cement and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southeast Cement Co and Basso Industry Corp, you can compare the effects of market volatilities on Southeast Cement 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 Southeast Cement with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southeast Cement and Basso Industry.

Diversification Opportunities for Southeast Cement and Basso Industry

0.76

Correlation Coefficient

Southeast Cement  Basso Industry

Poor diversification

The 3 months correlation between Southeast and Basso is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Southeast Cement Co 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 Southeast Cement 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 Southeast Cement Co 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 Southeast Cement i.e., Southeast Cement and Basso Industry go up and down completely randomly.

Pair Corralation between Southeast Cement and Basso Industry

Assuming the 90 days trading horizon Southeast Cement Co is expected to generate 1.76 times more return on investment than Basso Industry. However, Southeast Cement is 1.76 times more volatile than Basso Industry Corp. It trades about -0.28 of its potential returns per unit of risk. Basso Industry Corp is currently generating about -0.57 per unit of risk. If you would invest  2,140  in Southeast Cement Co on October 12, 2024 and sell it today you would lose (145.00) from holding Southeast Cement Co or give up 6.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Southeast Cement Co  vs.  Basso Industry Corp

Southeast Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southeast Cement Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Basso Industry Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Basso Industry Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Southeast Cement and Basso Industry

The main advantage of trading using opposite Southeast Cement and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southeast Cement 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 Southeast Cement Co 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.