Correlation Between STARLUX Airlines and Yageo Corp

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

By analyzing existing cross correlation between STARLUX Airlines Co and Yageo Corp, you can compare the effects of market volatilities on STARLUX Airlines and Yageo Corp 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 STARLUX Airlines with a short position of Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of STARLUX Airlines and Yageo Corp.

Diversification Opportunities for STARLUX Airlines and Yageo Corp

0.8

Correlation Coefficient

STARLUX Airlines  Yageo Corp

Very poor diversification

The 3 months correlation between STARLUX and Yageo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding STARLUX Airlines Co and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp and STARLUX Airlines 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 STARLUX Airlines Co are associated (or correlated) with Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of STARLUX Airlines i.e., STARLUX Airlines and Yageo Corp go up and down completely randomly.

Pair Corralation between STARLUX Airlines and Yageo Corp

Assuming the 90 days trading horizon STARLUX Airlines Co is expected to generate 0.83 times more return on investment than Yageo Corp. However, STARLUX Airlines Co is 1.21 times less risky than Yageo Corp. It trades about -0.17 of its potential returns per unit of risk. Yageo Corp is currently generating about -0.24 per unit of risk. If you would invest  3,155  in STARLUX Airlines Co on September 16, 2024 and sell it today you would lose (315.00) from holding STARLUX Airlines Co or give up 9.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

STARLUX Airlines Co  vs.  Yageo Corp

STARLUX Airlines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STARLUX Airlines Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, STARLUX Airlines is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yageo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yageo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with STARLUX Airlines and Yageo Corp

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

The idea behind STARLUX Airlines Co and Yageo Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.