Correlation Between Est Global and Baotek Industrial

Can any of the company-specific risk be diversified away by investing in both Est Global and Baotek Industrial 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 Est Global and Baotek Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Est Global Apparel and Baotek Industrial Materials, you can compare the effects of market volatilities on Est Global and Baotek Industrial 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 Est Global with a short position of Baotek Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Est Global and Baotek Industrial.

Diversification Opportunities for Est Global and Baotek Industrial

0.21

Correlation Coefficient

Est Global  Baotek Industrial

Modest diversification

The 3 months correlation between Est and Baotek is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Est Global Apparel and Baotek Industrial Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baotek Industrial and Est Global 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 Est Global Apparel are associated (or correlated) with Baotek Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baotek Industrial has no effect on the direction of Est Global i.e., Est Global and Baotek Industrial go up and down completely randomly.

Pair Corralation between Est Global and Baotek Industrial

Assuming the 90 days trading horizon Est Global Apparel is expected to generate 0.85 times more return on investment than Baotek Industrial. However, Est Global Apparel is 1.17 times less risky than Baotek Industrial. It trades about 0.02 of its potential returns per unit of risk. Baotek Industrial Materials is currently generating about -0.04 per unit of risk. If you would invest  1,725  in Est Global Apparel on September 18, 2024 and sell it today you would earn a total of  30.00  from holding Est Global Apparel or generate 1.74% return on investment over 90 days.

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

Est Global Apparel  vs.  Baotek Industrial Materials

Est Global Apparel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Est Global Apparel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Est Global is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Baotek Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baotek Industrial Materials 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 Est Global and Baotek Industrial

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

The idea behind Est Global Apparel and Baotek Industrial Materials 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.