Correlation Between Base Resources and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Base Resources and Leading Edge 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 Resources and Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Base Resources Limited and Leading Edge Materials, you can compare the effects of market volatilities on Base Resources and Leading Edge 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 Resources with a short position of Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Base Resources and Leading Edge.
Diversification Opportunities for Base Resources and Leading Edge
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Base and Leading is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Base Resources Limited and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Base Resources 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 Resources Limited are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Base Resources i.e., Base Resources and Leading Edge go up and down completely randomly.
Pair Corralation between Base Resources and Leading Edge
If you would invest 20.00 in Base Resources Limited on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Base Resources Limited or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Base Resources Limited vs. Leading Edge Materials
Performance |
| Timeline |
| Base Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Leading Edge Materials |
Base Resources and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Base Resources and Leading Edge
The main advantage of trading using opposite Base Resources and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Base Resources position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Base Resources vs. Macmahon Holdings Limited | Base Resources vs. Rokmaster Resources Corp | Base Resources vs. Hudson Resources | Base Resources vs. Thunder Gold Corp |
| Leading Edge vs. South32 Limited | Leading Edge vs. NioCorp Developments Ltd | Leading Edge vs. HUMANA INC | Leading Edge vs. SCOR PK |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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