Correlation Between BASE and AB International

Can any of the company-specific risk be diversified away by investing in both BASE and AB International 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 and AB International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BASE Inc and AB International Group, you can compare the effects of market volatilities on BASE and AB International 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 with a short position of AB International. Check out your portfolio center. Please also check ongoing floating volatility patterns of BASE and AB International.

Diversification Opportunities for BASE and AB International

-0.48

Correlation Coefficient

BASE  AB International

Very good diversification

The 3 months correlation between BASE and ABQQ is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and AB International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB International and 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 BASE Inc are associated (or correlated) with AB International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB International has no effect on the direction of BASE i.e., BASE and AB International go up and down completely randomly.

Pair Corralation between BASE and AB International

Assuming the 90 days horizon BASE Inc is expected to generate 0.15 times more return on investment than AB International. However, BASE Inc is 6.83 times less risky than AB International. It trades about 0.14 of its potential returns per unit of risk. AB International Group is currently generating about 0.01 per unit of risk. If you would invest  194.00  in BASE Inc on December 27, 2024 and sell it today you would earn a total of  60.00  from holding BASE Inc or generate 30.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

BASE Inc  vs.  AB International Group

BASE Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BASE reported solid returns over the last few months and may actually be approaching a breakup point.

AB International

Risk-Adjusted Performance

Very Weak

Over the last 90 days AB International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively inconsistent basic indicators, AB International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and AB International

The main advantage of trading using opposite BASE and AB International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASE position performs unexpectedly, AB International 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 AB International will offset losses from the drop in AB International's long position.

The idea behind BASE Inc and AB International Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.