Correlation Between European Residential and Starr Peak

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

By analyzing existing cross correlation between European Residential Real and Starr Peak Exploration, you can compare the effects of market volatilities on European Residential and Starr Peak 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 European Residential with a short position of Starr Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Residential and Starr Peak.

Diversification Opportunities for European Residential and Starr Peak

0.07

Correlation Coefficient

European Residential  Starr Peak

Significant diversification

The 3 months correlation between European and Starr is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding European Residential Real and Starr Peak Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starr Peak Exploration and European Residential 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 European Residential Real are associated (or correlated) with Starr Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starr Peak Exploration has no effect on the direction of European Residential i.e., European Residential and Starr Peak go up and down completely randomly.

Pair Corralation between European Residential and Starr Peak

Assuming the 90 days trading horizon European Residential Real is expected to under-perform the Starr Peak. In addition to that, European Residential is 1.37 times more volatile than Starr Peak Exploration. It trades about -0.04 of its total potential returns per unit of risk. Starr Peak Exploration is currently generating about -0.01 per unit of volatility. If you would invest  38.00  in Starr Peak Exploration on October 25, 2024 and sell it today you would lose (3.00) from holding Starr Peak Exploration or give up 7.89% of portfolio value over 90 days.

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

European Residential Real  vs.  Starr Peak Exploration

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Starr Peak Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starr Peak Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Starr Peak 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 European Residential and Starr Peak

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

The idea behind European Residential Real and Starr Peak Exploration 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.