Correlation Between Basso Industry and Mayer Steel

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

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

Diversification Opportunities for Basso Industry and Mayer Steel

0.69

Correlation Coefficient

Basso Industry  Mayer Steel

Poor diversification

The 3 months correlation between Basso and Mayer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Basso Industry Corp and Mayer Steel Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayer Steel Pipe and Basso Industry 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 Basso Industry Corp are associated (or correlated) with Mayer Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayer Steel Pipe has no effect on the direction of Basso Industry i.e., Basso Industry and Mayer Steel go up and down completely randomly.

Pair Corralation between Basso Industry and Mayer Steel

Assuming the 90 days trading horizon Basso Industry Corp is expected to under-perform the Mayer Steel. But the stock apears to be less risky and, when comparing its historical volatility, Basso Industry Corp is 1.96 times less risky than Mayer Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Mayer Steel Pipe is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,770  in Mayer Steel Pipe on December 21, 2024 and sell it today you would earn a total of  135.00  from holding Mayer Steel Pipe or generate 4.87% return on investment over 90 days.

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

Basso Industry Corp  vs.  Mayer Steel Pipe

Basso Industry Corp

Risk-Adjusted Performance

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 fairly stable basic indicators, Basso Industry is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mayer Steel Pipe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mayer Steel Pipe are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mayer Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Basso Industry and Mayer Steel

The main advantage of trading using opposite Basso Industry and Mayer Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basso Industry position performs unexpectedly, Mayer Steel 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 Mayer Steel will offset losses from the drop in Mayer Steel's long position.

The idea behind Basso Industry Corp and Mayer Steel Pipe 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.