Correlation Between Starr Peak and United Lithium

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

By analyzing existing cross correlation between Starr Peak Exploration and United Lithium Corp, you can compare the effects of market volatilities on Starr Peak and United Lithium 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 Starr Peak with a short position of United Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starr Peak and United Lithium.

Diversification Opportunities for Starr Peak and United Lithium

0.1

Correlation Coefficient

Starr Peak  United Lithium

Average diversification

The 3 months correlation between Starr and United is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Starr Peak Exploration and United Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Lithium Corp and Starr Peak 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 Starr Peak Exploration are associated (or correlated) with United Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Lithium Corp has no effect on the direction of Starr Peak i.e., Starr Peak and United Lithium go up and down completely randomly.

Pair Corralation between Starr Peak and United Lithium

Assuming the 90 days horizon Starr Peak Exploration is expected to generate 0.46 times more return on investment than United Lithium. However, Starr Peak Exploration is 2.2 times less risky than United Lithium. It trades about 0.07 of its potential returns per unit of risk. United Lithium Corp is currently generating about 0.0 per unit of risk. If you would invest  24.00  in Starr Peak Exploration on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Starr Peak Exploration or generate 12.5% return on investment over 90 days.

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

Starr Peak Exploration  vs.  United Lithium Corp

Starr Peak Exploration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starr Peak Exploration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Starr Peak reported solid returns over the last few months and may actually be approaching a breakup point.

United Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, United Lithium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Starr Peak and United Lithium

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

The idea behind Starr Peak Exploration and United Lithium Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.