Correlation Between Star Equity and Neuronetics

Can any of the company-specific risk be diversified away by investing in both Star Equity and Neuronetics 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 Neuronetics 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 Neuronetics, you can compare the effects of market volatilities on Star Equity and Neuronetics 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 Neuronetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Equity and Neuronetics.

Diversification Opportunities for Star Equity and Neuronetics

0.27

Correlation Coefficient

Star Equity  Neuronetics

Modest diversification

The 3 months correlation between Star and Neuronetics is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Star Equity Holdings and Neuronetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuronetics 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 Neuronetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuronetics has no effect on the direction of Star Equity i.e., Star Equity and Neuronetics go up and down completely randomly.

Pair Corralation between Star Equity and Neuronetics

Given the investment horizon of 90 days Star Equity is expected to generate 6.52 times less return on investment than Neuronetics. But when comparing it to its historical volatility, Star Equity Holdings is 2.4 times less risky than Neuronetics. It trades about 0.08 of its potential returns per unit of risk. Neuronetics is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Neuronetics on December 28, 2024 and sell it today you would earn a total of  229.00  from holding Neuronetics or generate 154.73% return on investment over 90 days.

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

Star Equity Holdings  vs.  Neuronetics

Star Equity Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity reported solid returns over the last few months and may actually be approaching a breakup point.

Neuronetics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neuronetics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Neuronetics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Star Equity and Neuronetics

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

The idea behind Star Equity Holdings and Neuronetics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.