Correlation Between Base Resources and Interra Copper

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

By analyzing existing cross correlation between Base Resources Limited and Interra Copper Corp, you can compare the effects of market volatilities on Base Resources and Interra Copper 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 Resources with a short position of Interra Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Base Resources and Interra Copper.

Diversification Opportunities for Base Resources and Interra Copper

-0.5

Correlation Coefficient

Base Resources  Interra Copper

Very good diversification

The 3 months correlation between Base and Interra is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Base Resources Limited and Interra Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interra Copper Corp and Base Resources 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 Resources Limited are associated (or correlated) with Interra Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interra Copper Corp has no effect on the direction of Base Resources i.e., Base Resources and Interra Copper go up and down completely randomly.

Pair Corralation between Base Resources and Interra Copper

Assuming the 90 days horizon Base Resources Limited is expected to generate 0.47 times more return on investment than Interra Copper. However, Base Resources Limited is 2.14 times less risky than Interra Copper. It trades about 0.29 of its potential returns per unit of risk. Interra Copper Corp is currently generating about 0.06 per unit of risk. If you would invest  13.00  in Base Resources Limited on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Base Resources Limited or generate 53.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	37.5%
Values	Daily Returns

Base Resources Limited  vs.  Interra Copper Corp

Base Resources

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Base Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Base Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Interra Copper Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Interra Copper Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Interra Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Base Resources and Interra Copper

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

The idea behind Base Resources Limited and Interra Copper Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.