Correlation Between Dear Cashmere and BASE

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

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

Diversification Opportunities for Dear Cashmere and BASE

-0.41

Correlation Coefficient

Dear Cashmere  BASE

Very good diversification

The 3 months correlation between Dear and BASE is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding and BASE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASE Inc and Dear Cashmere 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 Dear Cashmere Holding are associated (or correlated) with BASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASE Inc has no effect on the direction of Dear Cashmere i.e., Dear Cashmere and BASE go up and down completely randomly.

Pair Corralation between Dear Cashmere and BASE

Given the investment horizon of 90 days Dear Cashmere Holding is expected to generate 13.89 times more return on investment than BASE. However, Dear Cashmere is 13.89 times more volatile than BASE Inc. It trades about 0.05 of its potential returns per unit of risk. BASE Inc is currently generating about 0.02 per unit of risk. If you would invest  28.00  in Dear Cashmere Holding on October 22, 2024 and sell it today you would lose (18.90) from holding Dear Cashmere Holding or give up 67.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Dear Cashmere Holding  vs.  BASE Inc

Dear Cashmere Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Dear Cashmere is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BASE Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 14 (%) 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.

Pair Trading with Dear Cashmere and BASE

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

The idea behind Dear Cashmere Holding and BASE Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.