Correlation Between Element Solutions and Starco Brands

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

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

Diversification Opportunities for Element Solutions and Starco Brands

-0.67

Correlation Coefficient

Element Solutions  Starco Brands

Excellent diversification

The 3 months correlation between Element and Starco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Starco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starco Brands and Element Solutions 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 Element Solutions are associated (or correlated) with Starco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starco Brands has no effect on the direction of Element Solutions i.e., Element Solutions and Starco Brands go up and down completely randomly.

Pair Corralation between Element Solutions and Starco Brands

Considering the 90-day investment horizon Element Solutions is expected to under-perform the Starco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Element Solutions is 12.15 times less risky than Starco Brands. The stock trades about -0.17 of its potential returns per unit of risk. The Starco Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.70  in Starco Brands on September 12, 2024 and sell it today you would lose (0.30) from holding Starco Brands or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Element Solutions  vs.  Starco Brands

Element Solutions

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Element Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Starco Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Starco Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Starco Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Element Solutions and Starco Brands

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

The idea behind Element Solutions and Starco Brands 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.