Correlation Between Baotek Industrial and ReaLy Development

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

Diversification Opportunities for Baotek Industrial and ReaLy Development

-0.04

Correlation Coefficient

Baotek Industrial  ReaLy Development

Good diversification

The 3 months correlation between Baotek and ReaLy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and ReaLy Development Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReaLy Development 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 ReaLy Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReaLy Development has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and ReaLy Development go up and down completely randomly.

Pair Corralation between Baotek Industrial and ReaLy Development

Assuming the 90 days trading horizon Baotek Industrial Materials is expected to under-perform the ReaLy Development. In addition to that, Baotek Industrial is 1.31 times more volatile than ReaLy Development Construction. It trades about -0.03 of its total potential returns per unit of risk. ReaLy Development Construction is currently generating about 0.0 per unit of volatility. If you would invest  4,135  in ReaLy Development Construction on September 14, 2024 and sell it today you would lose (65.00) from holding ReaLy Development Construction or give up 1.57% of portfolio value over 90 days.

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

Baotek Industrial Materials  vs.  ReaLy Development Construction

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.

ReaLy Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReaLy Development Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ReaLy Development 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 ReaLy Development

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

The idea behind Baotek Industrial Materials and ReaLy Development Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.