Correlation Between Resource Base and EROAD
Can any of the company-specific risk be diversified away by investing in both Resource Base and EROAD 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 EROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and EROAD, you can compare the effects of market volatilities on Resource Base and EROAD 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 EROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and EROAD.
Diversification Opportunities for Resource Base and EROAD
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Resource and EROAD is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and EROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EROAD 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 EROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EROAD has no effect on the direction of Resource Base i.e., Resource Base and EROAD go up and down completely randomly.
Pair Corralation between Resource Base and EROAD
Assuming the 90 days trading horizon Resource Base is expected to generate 1.75 times more return on investment than EROAD. However, Resource Base is 1.75 times more volatile than EROAD. It trades about 0.21 of its potential returns per unit of risk. EROAD is currently generating about 0.01 per unit of risk. If you would invest 3.10 in Resource Base on November 28, 2024 and sell it today you would earn a total of 0.50 from holding Resource Base or generate 16.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Resource Base vs. EROAD
Performance |
| Timeline |
| Resource Base |
| EROAD |
Resource Base and EROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and EROAD
The main advantage of trading using opposite Resource Base and EROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, EROAD 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 EROAD will offset losses from the drop in EROAD's long position.| Resource Base vs. Oceania Healthcare | Resource Base vs. Bailador Technology Invest | Resource Base vs. Advanced Braking Technology | Resource Base vs. Health and Plant |
| EROAD vs. Mirrabooka Investments | EROAD vs. Arc Funds | EROAD vs. BlackWall Property Funds | EROAD vs. MFF Capital Investments |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |