Correlation Between South Star and Gratomic

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

Diversification Opportunities for South Star and Gratomic

0.76

Correlation Coefficient

South Star  Gratomic

Poor diversification

The 3 months correlation between South and Gratomic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding South Star Battery and Gratomic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gratomic 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 Gratomic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gratomic has no effect on the direction of South Star i.e., South Star and Gratomic go up and down completely randomly.

Pair Corralation between South Star and Gratomic

Assuming the 90 days horizon South Star Battery is expected to generate 0.78 times more return on investment than Gratomic. However, South Star Battery is 1.28 times less risky than Gratomic. It trades about 0.01 of its potential returns per unit of risk. Gratomic is currently generating about 0.0 per unit of risk. If you would invest  39.00  in South Star Battery on December 2, 2024 and sell it today you would lose (5.00) from holding South Star Battery or give up 12.82% of portfolio value over 90 days.

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

South Star Battery  vs.  Gratomic

South Star Battery

Risk-Adjusted Performance

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.

Gratomic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with South Star and Gratomic

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

The idea behind South Star Battery and Gratomic 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.