Correlation Between Resource Base and Change Financial

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

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

Diversification Opportunities for Resource Base and Change Financial

-0.26

Correlation Coefficient

Resource Base  Change Financial

Very good diversification

The 3 months correlation between Resource and Change is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Change Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Financial and Resource 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 Resource Base are associated (or correlated) with Change Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Financial has no effect on the direction of Resource Base i.e., Resource Base and Change Financial go up and down completely randomly.

Pair Corralation between Resource Base and Change Financial

Assuming the 90 days trading horizon Resource Base is expected to generate 0.43 times more return on investment than Change Financial. However, Resource Base is 2.33 times less risky than Change Financial. It trades about 0.23 of its potential returns per unit of risk. Change Financial Limited is currently generating about 0.0 per unit of risk. If you would invest  3.30  in Resource Base on October 13, 2024 and sell it today you would earn a total of  0.30  from holding Resource Base or generate 9.09% return on investment over 90 days.

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

Resource Base  vs.  Change Financial Limited

Resource Base

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Resource Base are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Resource Base may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Change Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Change Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Resource Base and Change Financial

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

The idea behind Resource Base and Change Financial Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.