Correlation Between BASE and Manhattan Associates

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

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

Diversification Opportunities for BASE and Manhattan Associates

-0.13

Correlation Coefficient

BASE  Manhattan Associates

Good diversification

The 3 months correlation between BASE and Manhattan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Manhattan Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manhattan Associates 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 Manhattan Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manhattan Associates has no effect on the direction of BASE i.e., BASE and Manhattan Associates go up and down completely randomly.

Pair Corralation between BASE and Manhattan Associates

Assuming the 90 days horizon BASE Inc is expected to generate 2.84 times more return on investment than Manhattan Associates. However, BASE is 2.84 times more volatile than Manhattan Associates. It trades about 0.06 of its potential returns per unit of risk. Manhattan Associates is currently generating about 0.01 per unit of risk. If you would invest  172.00  in BASE Inc on September 23, 2024 and sell it today you would earn a total of  21.00  from holding BASE Inc or generate 12.21% return on investment over 90 days.

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

BASE Inc  vs.  Manhattan Associates

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 abnormal basic indicators, BASE reported solid returns over the last few months and may actually be approaching a breakup point.

Manhattan Associates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manhattan Associates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Manhattan Associates is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BASE and Manhattan Associates

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

The idea behind BASE Inc and Manhattan Associates 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.