Correlation Between Environmental and Stelar Metals

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

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

Diversification Opportunities for Environmental and Stelar Metals

0.8

Correlation Coefficient

Environmental  Stelar Metals

Very poor diversification

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

Pair Corralation between Environmental and Stelar Metals

Assuming the 90 days trading horizon The Environmental Group is expected to generate 1.03 times more return on investment than Stelar Metals. However, Environmental is 1.03 times more volatile than Stelar Metals. It trades about 0.13 of its potential returns per unit of risk. Stelar Metals is currently generating about 0.04 per unit of risk. If you would invest  27.00  in The Environmental Group on September 19, 2024 and sell it today you would earn a total of  2.00  from holding The Environmental Group or generate 7.41% return on investment over 90 days.

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

The Environmental Group  vs.  Stelar Metals

The Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Environmental Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Stelar Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Environmental and Stelar Metals

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

The idea behind The Environmental Group and Stelar Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.