Correlation Between Big Ridge and Star Alliance

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

By analyzing existing cross correlation between Big Ridge Gold and Star Alliance International, you can compare the effects of market volatilities on Big Ridge and Star Alliance 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 Big Ridge with a short position of Star Alliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and Star Alliance.

Diversification Opportunities for Big Ridge and Star Alliance

0.31

Correlation Coefficient

Big Ridge  Star Alliance

Weak diversification

The 3 months correlation between Big and Star is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and Star Alliance International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Alliance Intern and Big Ridge 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 Big Ridge Gold are associated (or correlated) with Star Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Alliance Intern has no effect on the direction of Big Ridge i.e., Big Ridge and Star Alliance go up and down completely randomly.

Pair Corralation between Big Ridge and Star Alliance

Assuming the 90 days horizon Big Ridge Gold is expected to under-perform the Star Alliance. But the otc stock apears to be less risky and, when comparing its historical volatility, Big Ridge Gold is 1.47 times less risky than Star Alliance. The otc stock trades about -0.03 of its potential returns per unit of risk. The Star Alliance International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Star Alliance International on October 8, 2024 and sell it today you would lose (0.01) from holding Star Alliance International or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Big Ridge Gold  vs.  Star Alliance International

Big Ridge Gold

Risk-Adjusted Performance

0 of 100

Very Weak

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

Star Alliance Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Alliance International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Big Ridge and Star Alliance

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

The idea behind Big Ridge Gold and Star Alliance International 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.