Correlation Between Nano Magic and Starco Brands

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

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

Diversification Opportunities for Nano Magic and Starco Brands

0.07

Correlation Coefficient

Nano Magic  Starco Brands

Significant diversification

The 3 months correlation between Nano and Starco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nano Magic and Starco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starco Brands and Nano Magic 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 Nano Magic 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 Nano Magic i.e., Nano Magic and Starco Brands go up and down completely randomly.

Pair Corralation between Nano Magic and Starco Brands

Given the investment horizon of 90 days Nano Magic is expected to under-perform the Starco Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nano Magic is 6.36 times less risky than Starco Brands. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Starco Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Starco Brands on September 12, 2024 and sell it today you would lose (12.60) from holding Starco Brands or give up 63.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	6.07%
Values	Daily Returns

Nano Magic  vs.  Starco Brands

Nano Magic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nano Magic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Nano Magic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Nano Magic and Starco Brands

The main advantage of trading using opposite Nano Magic and Starco Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nano Magic 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 Nano Magic 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.