Correlation Between South Star and Jervois Mining

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

Diversification Opportunities for South Star and Jervois Mining

0.42

Correlation Coefficient

South Star  Jervois Mining

Very weak diversification

The 3 months correlation between South and Jervois is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding South Star Battery and Jervois Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jervois Mining 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 Jervois Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jervois Mining has no effect on the direction of South Star i.e., South Star and Jervois Mining go up and down completely randomly.

Pair Corralation between South Star and Jervois Mining

Assuming the 90 days horizon South Star Battery is expected to generate 0.52 times more return on investment than Jervois Mining. However, South Star Battery is 1.94 times less risky than Jervois Mining. It trades about -0.08 of its potential returns per unit of risk. Jervois Mining is currently generating about -0.07 per unit of risk. If you would invest  40.00  in South Star Battery on September 12, 2024 and sell it today you would lose (4.00) from holding South Star Battery or give up 10.0% of portfolio value over 90 days.

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

South Star Battery  vs.  Jervois Mining

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 latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Jervois Mining

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with South Star and Jervois Mining

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

The idea behind South Star Battery and Jervois Mining 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.