Correlation Between Baotek Industrial and Ruentex Industries

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

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

Diversification Opportunities for Baotek Industrial and Ruentex Industries

0.01

Correlation Coefficient

Baotek Industrial  Ruentex Industries

Significant diversification

The 3 months correlation between Baotek and Ruentex is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and Ruentex Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Industries and Baotek Industrial 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 Baotek Industrial Materials are associated (or correlated) with Ruentex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Industries has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and Ruentex Industries go up and down completely randomly.

Pair Corralation between Baotek Industrial and Ruentex Industries

Assuming the 90 days trading horizon Baotek Industrial Materials is expected to under-perform the Ruentex Industries. In addition to that, Baotek Industrial is 2.12 times more volatile than Ruentex Industries. It trades about -0.03 of its total potential returns per unit of risk. Ruentex Industries is currently generating about -0.04 per unit of volatility. If you would invest  7,870  in Ruentex Industries on September 15, 2024 and sell it today you would lose (330.00) from holding Ruentex Industries or give up 4.19% of portfolio value over 90 days.

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

Baotek Industrial Materials  vs.  Ruentex Industries

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

Ruentex Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Industries 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 Baotek Industrial and Ruentex Industries

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

The idea behind Baotek Industrial Materials and Ruentex Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.