Correlation Between Basic-Fit and Escalade Incorporated

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

By analyzing existing cross correlation between Basic Fit NV and Escalade Incorporated, you can compare the effects of market volatilities on Basic-Fit and Escalade Incorporated 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 Basic-Fit with a short position of Escalade Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic-Fit and Escalade Incorporated.

Diversification Opportunities for Basic-Fit and Escalade Incorporated

0.09

Correlation Coefficient

Basic-Fit  Escalade Incorporated

Significant diversification

The 3 months correlation between Basic-Fit and Escalade is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Basic Fit NV and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and Basic-Fit 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 Basic Fit NV are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of Basic-Fit i.e., Basic-Fit and Escalade Incorporated go up and down completely randomly.

Pair Corralation between Basic-Fit and Escalade Incorporated

Assuming the 90 days horizon Basic Fit NV is expected to under-perform the Escalade Incorporated. But the pink sheet apears to be less risky and, when comparing its historical volatility, Basic Fit NV is 1.71 times less risky than Escalade Incorporated. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Escalade Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,458  in Escalade Incorporated on December 4, 2024 and sell it today you would earn a total of  19.00  from holding Escalade Incorporated or generate 1.3% return on investment over 90 days.

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

Basic Fit NV  vs.  Escalade Incorporated

Basic Fit NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Fit NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Basic-Fit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Escalade Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Escalade Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Escalade Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Basic-Fit and Escalade Incorporated

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

The idea behind Basic Fit NV and Escalade Incorporated 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.