Correlation Between BASE and Shotspotter

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

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

Diversification Opportunities for BASE and Shotspotter

0.27

Correlation Coefficient

BASE  Shotspotter

Modest diversification

The 3 months correlation between BASE and Shotspotter is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Shotspotter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shotspotter 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 Shotspotter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shotspotter has no effect on the direction of BASE i.e., BASE and Shotspotter go up and down completely randomly.

Pair Corralation between BASE and Shotspotter

Assuming the 90 days horizon BASE Inc is expected to generate 1.16 times more return on investment than Shotspotter. However, BASE is 1.16 times more volatile than Shotspotter. It trades about 0.03 of its potential returns per unit of risk. Shotspotter is currently generating about -0.05 per unit of risk. If you would invest  177.00  in BASE Inc on October 3, 2024 and sell it today you would earn a total of  27.00  from holding BASE Inc or generate 15.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BASE Inc  vs.  Shotspotter

BASE Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 6 (%) 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.

Shotspotter

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shotspotter are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Shotspotter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and Shotspotter

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

The idea behind BASE Inc and Shotspotter 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.