Correlation Between Baker Steel and Central Asia
Can any of the company-specific risk be diversified away by investing in both Baker Steel and Central Asia 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 Baker Steel and Central Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Central Asia Metals, you can compare the effects of market volatilities on Baker Steel and Central Asia 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 Baker Steel with a short position of Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Central Asia.
Diversification Opportunities for Baker Steel and Central Asia
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Baker and Central is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals and Baker Steel 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 Baker Steel Resources are associated (or correlated) with Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Baker Steel i.e., Baker Steel and Central Asia go up and down completely randomly.
Pair Corralation between Baker Steel and Central Asia
Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 2.73 times more return on investment than Central Asia. However, Baker Steel is 2.73 times more volatile than Central Asia Metals. It trades about 0.06 of its potential returns per unit of risk. Central Asia Metals is currently generating about 0.02 per unit of risk. If you would invest 3,950 in Baker Steel Resources on September 3, 2024 and sell it today you would earn a total of 1,850 from holding Baker Steel Resources or generate 46.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Central Asia Metals
Performance |
| Timeline |
| Baker Steel Resources |
| Central Asia Metals |
Baker Steel and Central Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Central Asia
The main advantage of trading using opposite Baker Steel and Central Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel position performs unexpectedly, Central Asia 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 Central Asia will offset losses from the drop in Central Asia's long position.| Baker Steel vs. Odyssean Investment Trust | Baker Steel vs. FC Investment Trust | Baker Steel vs. Schroders Investment Trusts | Baker Steel vs. Tatton Asset Management |
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 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.
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