Correlation Between BASE and HeartCore Enterprises

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

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

Diversification Opportunities for BASE and HeartCore Enterprises

-0.14

Correlation Coefficient

BASE  HeartCore Enterprises

Good diversification

The 3 months correlation between BASE and HeartCore is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and HeartCore Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeartCore Enterprises 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 HeartCore Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeartCore Enterprises has no effect on the direction of BASE i.e., BASE and HeartCore Enterprises go up and down completely randomly.

Pair Corralation between BASE and HeartCore Enterprises

Assuming the 90 days horizon BASE Inc is expected to generate 0.84 times more return on investment than HeartCore Enterprises. However, BASE Inc is 1.2 times less risky than HeartCore Enterprises. It trades about 0.22 of its potential returns per unit of risk. HeartCore Enterprises is currently generating about 0.02 per unit of risk. If you would invest  150.00  in BASE Inc on September 26, 2024 and sell it today you would earn a total of  43.00  from holding BASE Inc or generate 28.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BASE Inc  vs.  HeartCore Enterprises

BASE Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 4 (%) 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.

HeartCore Enterprises

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HeartCore Enterprises are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, HeartCore Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and HeartCore Enterprises

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

The idea behind BASE Inc and HeartCore Enterprises 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.