Correlation Between Stelar Metals and Rea

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

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

Diversification Opportunities for Stelar Metals and Rea

-0.37

Correlation Coefficient

Stelar Metals  Rea

Very good diversification

The 3 months correlation between Stelar and Rea is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and Rea Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rea Group and Stelar Metals 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 Stelar Metals are associated (or correlated) with Rea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rea Group has no effect on the direction of Stelar Metals i.e., Stelar Metals and Rea go up and down completely randomly.

Pair Corralation between Stelar Metals and Rea

Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the Rea. But the stock apears to be less risky and, when comparing its historical volatility, Stelar Metals is 1.68 times less risky than Rea. The stock trades about -0.12 of its potential returns per unit of risk. The Rea Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  24,436  in Rea Group on December 4, 2024 and sell it today you would lose (24.00) from holding Rea Group or give up 0.1% of portfolio value over 90 days.

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

Stelar Metals  vs.  Rea Group

Stelar Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Rea Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rea Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rea is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Stelar Metals and Rea

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

The idea behind Stelar Metals and Rea Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.