Correlation Between Strong H and STARLUX Airlines

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

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

Diversification Opportunities for Strong H and STARLUX Airlines

-0.54

Correlation Coefficient

Strong H  STARLUX Airlines

Excellent diversification

The 3 months correlation between Strong and STARLUX is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Strong H Machinery and STARLUX Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STARLUX Airlines and Strong H 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 Strong H Machinery are associated (or correlated) with STARLUX Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STARLUX Airlines has no effect on the direction of Strong H i.e., Strong H and STARLUX Airlines go up and down completely randomly.

Pair Corralation between Strong H and STARLUX Airlines

Assuming the 90 days trading horizon Strong H is expected to generate 18.3 times less return on investment than STARLUX Airlines. But when comparing it to its historical volatility, Strong H Machinery is 3.44 times less risky than STARLUX Airlines. It trades about 0.01 of its potential returns per unit of risk. STARLUX Airlines Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,890  in STARLUX Airlines Co on October 4, 2024 and sell it today you would earn a total of  900.00  from holding STARLUX Airlines Co or generate 47.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.96%
Values	Daily Returns

Strong H Machinery  vs.  STARLUX Airlines Co

Strong H Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strong H Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Strong H may actually be approaching a critical reversion point that can send shares even higher in February 2025.

STARLUX Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STARLUX Airlines Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Strong H and STARLUX Airlines

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

The idea behind Strong H Machinery and STARLUX Airlines Co 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.