Correlation Between Alien Metals and Star Royalties

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

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

Diversification Opportunities for Alien Metals and Star Royalties

0.23

Correlation Coefficient

Alien Metals  Star Royalties

Modest diversification

The 3 months correlation between Alien and Star is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties and Alien Metals 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 Alien Metals are associated (or correlated) with Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of Alien Metals i.e., Alien Metals and Star Royalties go up and down completely randomly.

Pair Corralation between Alien Metals and Star Royalties

Assuming the 90 days horizon Alien Metals is expected to generate 35.68 times more return on investment than Star Royalties. However, Alien Metals is 35.68 times more volatile than Star Royalties. It trades about 0.15 of its potential returns per unit of risk. Star Royalties is currently generating about 0.0 per unit of risk. If you would invest  0.23  in Alien Metals on December 27, 2024 and sell it today you would lose (0.16) from holding Alien Metals or give up 69.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Alien Metals  vs.  Star Royalties

Alien Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Star Royalties

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alien Metals and Star Royalties

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

The idea behind Alien Metals and Star Royalties 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.