Correlation Between BASE and VTEX
Can any of the company-specific risk be diversified away by investing in both BASE and VTEX 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 BASE and VTEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BASE Inc and VTEX, you can compare the effects of market volatilities on BASE and VTEX 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 BASE with a short position of VTEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASE and VTEX.
Diversification Opportunities for BASE and VTEX
Modest diversification
The 3 months correlation between BASE and VTEX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and VTEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VTEX and BASE 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 BASE Inc are associated (or correlated) with VTEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VTEX has no effect on the direction of BASE i.e., BASE and VTEX go up and down completely randomly.
Pair Corralation between BASE and VTEX
Assuming the 90 days horizon BASE Inc is expected to generate 2.5 times more return on investment than VTEX. However, BASE is 2.5 times more volatile than VTEX. It trades about 0.4 of its potential returns per unit of risk. VTEX is currently generating about -0.08 per unit of risk. If you would invest 126.00 in BASE Inc on August 24, 2024 and sell it today you would earn a total of 46.00 from holding BASE Inc or generate 36.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BASE Inc vs. VTEX
Performance |
| Timeline |
| BASE Inc |
| VTEX |
BASE and VTEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BASE and VTEX
The main advantage of trading using opposite BASE and VTEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASE position performs unexpectedly, VTEX 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 VTEX will offset losses from the drop in VTEX's long position.The idea behind BASE Inc and VTEX 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.Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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