Correlation Between South Star and Bourque Indts

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

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

Diversification Opportunities for South Star and Bourque Indts

-0.18

Correlation Coefficient

South Star  Bourque Indts

Good diversification

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

Pair Corralation between South Star and Bourque Indts

Assuming the 90 days horizon South Star Battery is expected to generate 0.44 times more return on investment than Bourque Indts. However, South Star Battery is 2.27 times less risky than Bourque Indts. It trades about -0.02 of its potential returns per unit of risk. Bourque Indts is currently generating about -0.22 per unit of risk. If you would invest  41.00  in South Star Battery on September 5, 2024 and sell it today you would lose (2.00) from holding South Star Battery or give up 4.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

South Star Battery  vs.  Bourque Indts

South Star Battery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bourque Indts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bourque Indts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Bourque Indts disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South Star and Bourque Indts

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

The idea behind South Star Battery and Bourque Indts 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.