Correlation Between Tower Resources and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Tower Resources and Baker Steel 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 Tower Resources and Baker Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Resources plc and Baker Steel Resources, you can compare the effects of market volatilities on Tower Resources and Baker Steel 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 Tower Resources with a short position of Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Resources and Baker Steel.
Diversification Opportunities for Tower Resources and Baker Steel
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tower and Baker is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tower Resources plc and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources and Tower 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 Tower Resources plc are associated (or correlated) with Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Tower Resources i.e., Tower Resources and Baker Steel go up and down completely randomly.
Pair Corralation between Tower Resources and Baker Steel
Assuming the 90 days trading horizon Tower Resources plc is expected to generate 3.47 times more return on investment than Baker Steel. However, Tower Resources is 3.47 times more volatile than Baker Steel Resources. It trades about 0.01 of its potential returns per unit of risk. Baker Steel Resources is currently generating about 0.02 per unit of risk. If you would invest 16.00 in Tower Resources plc on November 5, 2024 and sell it today you would lose (13.05) from holding Tower Resources plc or give up 81.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Resources plc vs. Baker Steel Resources
Performance |
| Timeline |
| Tower Resources plc |
| Baker Steel Resources |
Tower Resources and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Resources and Baker Steel
The main advantage of trading using opposite Tower Resources and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Resources position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| Tower Resources vs. National Beverage Corp | Tower Resources vs. Axway Software SA | Tower Resources vs. Take Two Interactive Software | Tower Resources vs. Vitec Software Group |
| Baker Steel vs. Adriatic Metals | Baker Steel vs. Eastinco Mining Exploration | Baker Steel vs. Medical Properties Trust | Baker Steel vs. LPKF Laser Electronics |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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