Correlation Between Resource Base and London City
Can any of the company-specific risk be diversified away by investing in both Resource Base and London City 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 London City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Resource Base and London City Equities, you can compare the effects of market volatilities on Resource Base and London City 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 London City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and London City.
Diversification Opportunities for Resource Base and London City
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Resource and London is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and London City Equities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London City Equities 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 London City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London City Equities has no effect on the direction of Resource Base i.e., Resource Base and London City go up and down completely randomly.
Pair Corralation between Resource Base and London City
Assuming the 90 days trading horizon Resource Base is expected to under-perform the London City. In addition to that, Resource Base is 4.43 times more volatile than London City Equities. It trades about -0.18 of its total potential returns per unit of risk. London City Equities is currently generating about 0.28 per unit of volatility. If you would invest 83.00 in London City Equities on November 8, 2024 and sell it today you would earn a total of 4.00 from holding London City Equities or generate 4.82% 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. London City Equities
Performance |
| Timeline |
| Resource Base |
| London City Equities |
Resource Base and London City Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Resource Base and London City
The main advantage of trading using opposite Resource Base and London City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, London City 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 London City will offset losses from the drop in London City's long position.| Resource Base vs. Red Hill Iron | Resource Base vs. Pinnacle Investment Management | Resource Base vs. Retail Food Group | Resource Base vs. Clime Investment Management |
| London City vs. Retail Food Group | London City vs. My Foodie Box | London City vs. Sky Metals | London City vs. Catalyst 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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