Correlation Between Resource Base and Credit Corp
Can any of the company-specific risk be diversified away by investing in both Resource Base and Credit Corp 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 Resource Base and Credit Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and Credit Corp Group, you can compare the effects of market volatilities on Resource Base and Credit Corp 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 Resource Base with a short position of Credit Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and Credit Corp.
Diversification Opportunities for Resource Base and Credit Corp
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Resource and Credit is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Credit Corp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Corp Group and Resource 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 Resource Base are associated (or correlated) with Credit Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Corp Group has no effect on the direction of Resource Base i.e., Resource Base and Credit Corp go up and down completely randomly.
Pair Corralation between Resource Base and Credit Corp
Assuming the 90 days trading horizon Resource Base is expected to generate 1.77 times more return on investment than Credit Corp. However, Resource Base is 1.77 times more volatile than Credit Corp Group. It trades about 0.3 of its potential returns per unit of risk. Credit Corp Group is currently generating about 0.09 per unit of risk. If you would invest 3.50 in Resource Base on August 30, 2024 and sell it today you would earn a total of 0.70 from holding Resource Base or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Resource Base vs. Credit Corp Group
Performance |
| Timeline |
| Resource Base |
| Credit Corp Group |
Resource Base and Credit Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and Credit Corp
The main advantage of trading using opposite Resource Base and Credit Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, Credit Corp 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 Credit Corp will offset losses from the drop in Credit Corp's long position.| Resource Base vs. ARN Media Limited | Resource Base vs. Australian Agricultural | Resource Base vs. Red Hill Iron | Resource Base vs. Australian Unity Office |
| Credit Corp vs. Hutchison Telecommunications | Credit Corp vs. IDP Education | Credit Corp vs. Strickland Metals | Credit Corp vs. Aeon Metals |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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