Correlation Between BASE and Global Business

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

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

Diversification Opportunities for BASE and Global Business

0.21

Correlation Coefficient

BASE  Global Business

Modest diversification

The 3 months correlation between BASE and Global is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Global Business Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Business Travel 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 Global Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Business Travel has no effect on the direction of BASE i.e., BASE and Global Business go up and down completely randomly.

Pair Corralation between BASE and Global Business

Assuming the 90 days horizon BASE is expected to generate 1.07 times less return on investment than Global Business. In addition to that, BASE is 2.71 times more volatile than Global Business Travel. It trades about 0.06 of its total potential returns per unit of risk. Global Business Travel is currently generating about 0.17 per unit of volatility. If you would invest  762.00  in Global Business Travel on September 26, 2024 and sell it today you would earn a total of  186.00  from holding Global Business Travel or generate 24.41% 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.  Global Business Travel

BASE Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 4 (%) 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.

Global Business Travel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Business Travel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Global Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BASE and Global Business

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

The idea behind BASE Inc and Global Business Travel 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.