Correlation Between Bear Creek and Star Royalties

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

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

Diversification Opportunities for Bear Creek and Star Royalties

0.76

Correlation Coefficient

Bear Creek  Star Royalties

Poor diversification

The 3 months correlation between Bear and Star is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bear Creek Mining and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties and Bear Creek 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 Bear Creek Mining 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 Bear Creek i.e., Bear Creek and Star Royalties go up and down completely randomly.

Pair Corralation between Bear Creek and Star Royalties

Assuming the 90 days horizon Bear Creek Mining is expected to generate 1.85 times more return on investment than Star Royalties. However, Bear Creek is 1.85 times more volatile than Star Royalties. It trades about 0.03 of its potential returns per unit of risk. Star Royalties is currently generating about 0.02 per unit of risk. If you would invest  26.00  in Bear Creek Mining on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Bear Creek Mining or generate 0.0% return on investment over 90 days.

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

Bear Creek Mining  vs.  Star Royalties

Bear Creek Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bear Creek Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Star Royalties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Bear Creek and Star Royalties

The main advantage of trading using opposite Bear Creek and Star Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bear Creek 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 Bear Creek Mining 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.