Correlation Between Stellar and SIERRA MADRE

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

By analyzing existing cross correlation between Stellar and SIERRA MADRE GOLD, you can compare the effects of market volatilities on Stellar and SIERRA MADRE 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 Stellar with a short position of SIERRA MADRE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and SIERRA MADRE.

Diversification Opportunities for Stellar and SIERRA MADRE

-0.77

Correlation Coefficient

Stellar  SIERRA MADRE

Pay attention - limited upside

The 3 months correlation between Stellar and SIERRA is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SIERRA MADRE GOLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA MADRE GOLD and Stellar 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 Stellar are associated (or correlated) with SIERRA MADRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA MADRE GOLD has no effect on the direction of Stellar i.e., Stellar and SIERRA MADRE go up and down completely randomly.

Pair Corralation between Stellar and SIERRA MADRE

Assuming the 90 days trading horizon Stellar is expected to generate 2.64 times more return on investment than SIERRA MADRE. However, Stellar is 2.64 times more volatile than SIERRA MADRE GOLD. It trades about 0.26 of its potential returns per unit of risk. SIERRA MADRE GOLD is currently generating about -0.01 per unit of risk. If you would invest  9.01  in Stellar on October 9, 2024 and sell it today you would earn a total of  34.99  from holding Stellar or generate 388.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Stellar  vs.  SIERRA MADRE GOLD

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

SIERRA MADRE GOLD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Stellar and SIERRA MADRE

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

The idea behind Stellar and SIERRA MADRE GOLD 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.