Correlation Between Baotek Industrial and Grand Plastic

Can any of the company-specific risk be diversified away by investing in both Baotek Industrial and Grand Plastic 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 Grand Plastic 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 Grand Plastic Technology, you can compare the effects of market volatilities on Baotek Industrial and Grand Plastic 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 Grand Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baotek Industrial and Grand Plastic.

Diversification Opportunities for Baotek Industrial and Grand Plastic

0.48

Correlation Coefficient

Baotek Industrial  Grand Plastic

Very weak diversification

The 3 months correlation between Baotek and Grand is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and Grand Plastic Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Plastic Technology 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 Grand Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Plastic Technology has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and Grand Plastic go up and down completely randomly.

Pair Corralation between Baotek Industrial and Grand Plastic

Assuming the 90 days trading horizon Baotek Industrial Materials is expected to under-perform the Grand Plastic. But the stock apears to be less risky and, when comparing its historical volatility, Baotek Industrial Materials is 1.39 times less risky than Grand Plastic. The stock trades about -0.15 of its potential returns per unit of risk. The Grand Plastic Technology is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  175,000  in Grand Plastic Technology on October 15, 2024 and sell it today you would lose (37,000) from holding Grand Plastic Technology or give up 21.14% of portfolio value over 90 days.

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

Baotek Industrial Materials  vs.  Grand Plastic Technology

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Grand Plastic Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Plastic Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Baotek Industrial and Grand Plastic

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

The idea behind Baotek Industrial Materials and Grand Plastic Technology 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.