Correlation Between SEED and STAR AFRICA

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

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

Diversification Opportunities for SEED and STAR AFRICA

0.18

Correlation Coefficient

SEED  STAR AFRICA

Average diversification

The 3 months correlation between SEED and STAR is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding SEED LIMITED and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION and SEED 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 SEED LIMITED are associated (or correlated) with STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of SEED i.e., SEED and STAR AFRICA go up and down completely randomly.

Pair Corralation between SEED and STAR AFRICA

Assuming the 90 days trading horizon SEED LIMITED is expected to under-perform the STAR AFRICA. But the stock apears to be less risky and, when comparing its historical volatility, SEED LIMITED is 2.1 times less risky than STAR AFRICA. The stock trades about -0.39 of its potential returns per unit of risk. The STAR AFRICA PORATION is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  240.00  in STAR AFRICA PORATION on October 12, 2024 and sell it today you would lose (40.00) from holding STAR AFRICA PORATION or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

SEED LIMITED  vs.  STAR AFRICA PORATION

SEED LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEED LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

STAR AFRICA PORATION

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STAR AFRICA PORATION are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, STAR AFRICA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SEED and STAR AFRICA

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

The idea behind SEED LIMITED and STAR AFRICA PORATION 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.