Correlation Between BASE and Computer Modelling

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

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

Diversification Opportunities for BASE and Computer Modelling

-0.71

Correlation Coefficient

BASE  Computer Modelling

Pay attention - limited upside

The 3 months correlation between BASE and Computer is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Computer Modelling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Modelling 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 Computer Modelling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Modelling has no effect on the direction of BASE i.e., BASE and Computer Modelling go up and down completely randomly.

Pair Corralation between BASE and Computer Modelling

Assuming the 90 days horizon BASE Inc is expected to generate 1.34 times more return on investment than Computer Modelling. However, BASE is 1.34 times more volatile than Computer Modelling Group. It trades about 0.12 of its potential returns per unit of risk. Computer Modelling Group is currently generating about -0.11 per unit of risk. If you would invest  204.00  in BASE Inc on December 29, 2024 and sell it today you would earn a total of  50.00  from holding BASE Inc or generate 24.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

BASE Inc  vs.  Computer Modelling 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 9 (%) 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.

Computer Modelling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BASE and Computer Modelling

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

The idea behind BASE Inc and Computer Modelling 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.