Correlation Between Star Equity and Psychemedics

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

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

Diversification Opportunities for Star Equity and Psychemedics

-0.51

Correlation Coefficient

Star Equity  Psychemedics

Excellent diversification

The 3 months correlation between Star and Psychemedics is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Star Equity Holdings and Psychemedics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Psychemedics and Star Equity 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 Equity Holdings are associated (or correlated) with Psychemedics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Psychemedics has no effect on the direction of Star Equity i.e., Star Equity and Psychemedics go up and down completely randomly.

Pair Corralation between Star Equity and Psychemedics

Given the investment horizon of 90 days Star Equity Holdings is expected to under-perform the Psychemedics. But the stock apears to be less risky and, when comparing its historical volatility, Star Equity Holdings is 1.62 times less risky than Psychemedics. The stock trades about -0.19 of its potential returns per unit of risk. The Psychemedics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Psychemedics on September 15, 2024 and sell it today you would earn a total of  35.00  from holding Psychemedics or generate 15.09% return on investment over 90 days.

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

Star Equity Holdings  vs.  Psychemedics

Star Equity Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Equity Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Psychemedics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Psychemedics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Psychemedics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Star Equity and Psychemedics

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

The idea behind Star Equity Holdings and Psychemedics 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 Commodity Directory module to find actively traded commodities issued by global exchanges.