Correlation Between Resource Base and Sequoia Financial
Can any of the company-specific risk be diversified away by investing in both Resource Base and Sequoia 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 Sequoia 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 Sequoia Financial Group, you can compare the effects of market volatilities on Resource Base and Sequoia 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 Sequoia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Resource Base and Sequoia Financial.
Diversification Opportunities for Resource Base and Sequoia Financial
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Resource and Sequoia is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Resource Base and Sequoia Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sequoia 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 Sequoia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sequoia Financial has no effect on the direction of Resource Base i.e., Resource Base and Sequoia Financial go up and down completely randomly.
Pair Corralation between Resource Base and Sequoia Financial
Assuming the 90 days trading horizon Resource Base is expected to under-perform the Sequoia Financial. In addition to that, Resource Base is 1.18 times more volatile than Sequoia Financial Group. It trades about -0.18 of its total potential returns per unit of risk. Sequoia Financial Group is currently generating about 0.23 per unit of volatility. If you would invest 33.00 in Sequoia Financial Group on September 26, 2024 and sell it today you would earn a total of 5.00 from holding Sequoia Financial Group or generate 15.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Resource Base vs. Sequoia Financial Group
Performance |
Timeline |
Resource Base |
Sequoia Financial |
Resource Base and Sequoia Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Resource Base and Sequoia Financial
The main advantage of trading using opposite Resource Base and Sequoia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Resource Base position performs unexpectedly, Sequoia 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 Sequoia Financial will offset losses from the drop in Sequoia Financial's long position.Resource Base vs. Northern Star Resources | Resource Base vs. Evolution Mining | Resource Base vs. Aneka Tambang Tbk | Resource Base vs. Sandfire Resources NL |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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