Correlation Between STAR AFRICA and FIRST MUTUAL

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

By analyzing existing cross correlation between STAR AFRICA PORATION and FIRST MUTUAL PROPERTIES, you can compare the effects of market volatilities on STAR AFRICA and FIRST MUTUAL 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 STAR AFRICA with a short position of FIRST MUTUAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of STAR AFRICA and FIRST MUTUAL.

Diversification Opportunities for STAR AFRICA and FIRST MUTUAL

-0.08

Correlation Coefficient

STAR AFRICA  FIRST MUTUAL

Good diversification

The 3 months correlation between STAR and FIRST is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding STAR AFRICA PORATION and FIRST MUTUAL PROPERTIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST MUTUAL PROPERTIES and STAR AFRICA 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 STAR AFRICA PORATION are associated (or correlated) with FIRST MUTUAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST MUTUAL PROPERTIES has no effect on the direction of STAR AFRICA i.e., STAR AFRICA and FIRST MUTUAL go up and down completely randomly.

Pair Corralation between STAR AFRICA and FIRST MUTUAL

Assuming the 90 days trading horizon STAR AFRICA PORATION is expected to generate 15.93 times more return on investment than FIRST MUTUAL. However, STAR AFRICA is 15.93 times more volatile than FIRST MUTUAL PROPERTIES. It trades about 0.09 of its potential returns per unit of risk. FIRST MUTUAL PROPERTIES is currently generating about -0.16 per unit of risk. If you would invest  220.00  in STAR AFRICA PORATION on October 27, 2024 and sell it today you would earn a total of  21.00  from holding STAR AFRICA PORATION or generate 9.55% return on investment over 90 days.

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

STAR AFRICA PORATION  vs.  FIRST MUTUAL PROPERTIES

STAR AFRICA PORATION

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STAR AFRICA PORATION are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, STAR AFRICA showed solid returns over the last few months and may actually be approaching a breakup point.

FIRST MUTUAL PROPERTIES

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST MUTUAL PROPERTIES are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, FIRST MUTUAL demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STAR AFRICA and FIRST MUTUAL

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

The idea behind STAR AFRICA PORATION and FIRST MUTUAL PROPERTIES 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.