Correlation Between Select Energy and Starco Brands

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

By analyzing existing cross correlation between Select Energy Services and Starco Brands, you can compare the effects of market volatilities on Select Energy and Starco Brands 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 Select Energy with a short position of Starco Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Starco Brands.

Diversification Opportunities for Select Energy and Starco Brands

0.74

Correlation Coefficient

Select Energy  Starco Brands

Poor diversification

The 3 months correlation between Select and Starco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Starco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starco Brands and Select Energy 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 Select Energy Services are associated (or correlated) with Starco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starco Brands has no effect on the direction of Select Energy i.e., Select Energy and Starco Brands go up and down completely randomly.

Pair Corralation between Select Energy and Starco Brands

Given the investment horizon of 90 days Select Energy Services is expected to under-perform the Starco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Select Energy Services is 4.4 times less risky than Starco Brands. The stock trades about -0.11 of its potential returns per unit of risk. The Starco Brands is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Starco Brands on December 28, 2024 and sell it today you would lose (2.80) from holding Starco Brands or give up 35.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Select Energy Services  vs.  Starco Brands

Select Energy Services

Risk-Adjusted Performance

Very Weak

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

Starco Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Starco Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Starco Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Select Energy and Starco Brands

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

The idea behind Select Energy Services and Starco Brands 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.