Correlation Between Fortune Electric and Basso Industry
Can any of the company-specific risk be diversified away by investing in both Fortune Electric 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 Fortune Electric and Basso Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Electric Co and Basso Industry Corp, you can compare the effects of market volatilities on Fortune Electric 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 Fortune Electric with a short position of Basso Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Electric and Basso Industry.
Diversification Opportunities for Fortune Electric and Basso Industry
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortune and Basso is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Electric 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 Fortune Electric 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 Fortune Electric 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 Fortune Electric i.e., Fortune Electric and Basso Industry go up and down completely randomly.
Pair Corralation between Fortune Electric and Basso Industry
Assuming the 90 days trading horizon Fortune Electric Co is expected to under-perform the Basso Industry. In addition to that, Fortune Electric is 2.0 times more volatile than Basso Industry Corp. It trades about -0.18 of its total potential returns per unit of risk. Basso Industry Corp is currently generating about -0.05 per unit of volatility. If you would invest 4,250 in Basso Industry Corp on October 20, 2024 and sell it today you would lose (50.00) from holding Basso Industry Corp or give up 1.18% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Fortune Electric Co vs. Basso Industry Corp
Performance |
Timeline |
Fortune Electric |
Basso Industry Corp |
Fortune Electric and Basso Industry Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fortune Electric and Basso Industry
The main advantage of trading using opposite Fortune Electric and Basso Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Electric 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.Fortune Electric vs. Chung Hsin Electric Machinery | Fortune Electric vs. TECO Electric Machinery | Fortune Electric vs. Shihlin Electric Engineering | Fortune Electric vs. Allis Electric Co |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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