Correlation Between Base Resources and CITIC Resources

Can any of the company-specific risk be diversified away by investing in both Base Resources and CITIC Resources 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 CITIC Resources 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 CITIC Resources Holdings, you can compare the effects of market volatilities on Base Resources and CITIC Resources 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 CITIC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Base Resources and CITIC Resources.

Diversification Opportunities for Base Resources and CITIC Resources

0.55

Correlation Coefficient

Base Resources  CITIC Resources

Very weak diversification

The 3 months correlation between Base and CITIC is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Base Resources Limited and CITIC Resources Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Resources Holdings 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 CITIC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Resources Holdings has no effect on the direction of Base Resources i.e., Base Resources and CITIC Resources go up and down completely randomly.

Pair Corralation between Base Resources and CITIC Resources

If you would invest  8.00  in CITIC Resources Holdings on October 1, 2024 and sell it today you would earn a total of  0.00  from holding CITIC Resources Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.0%
Values	Daily Returns

Base Resources Limited  vs.  CITIC Resources Holdings

Base Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Base Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Base Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CITIC Resources Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Resources Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, CITIC Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Base Resources and CITIC Resources

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

The idea behind Base Resources Limited and CITIC Resources Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.