Correlation Between Top Glove and Baxter International

Can any of the company-specific risk be diversified away by investing in both Top Glove and Baxter International 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 Top Glove and Baxter International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Top Glove and Baxter International, you can compare the effects of market volatilities on Top Glove and Baxter International 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 Top Glove with a short position of Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Glove and Baxter International.

Diversification Opportunities for Top Glove and Baxter International

-0.63

Correlation Coefficient

Top Glove  Baxter International

Excellent diversification

The 3 months correlation between Top and Baxter is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Top Glove and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International and Top Glove 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 Top Glove are associated (or correlated) with Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Top Glove i.e., Top Glove and Baxter International go up and down completely randomly.

Pair Corralation between Top Glove and Baxter International

Assuming the 90 days horizon Top Glove is expected to generate 3.52 times more return on investment than Baxter International. However, Top Glove is 3.52 times more volatile than Baxter International. It trades about 0.13 of its potential returns per unit of risk. Baxter International is currently generating about -0.1 per unit of risk. If you would invest  17.00  in Top Glove on September 3, 2024 and sell it today you would earn a total of  8.00  from holding Top Glove or generate 47.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Top Glove  vs.  Baxter International

Top Glove

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Top Glove reported solid returns over the last few months and may actually be approaching a breakup point.

Baxter International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baxter International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Top Glove and Baxter International

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

The idea behind Top Glove and Baxter International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.