Correlation Between Stellar and Bayside Corp

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

By analyzing existing cross correlation between Stellar and Bayside Corp, you can compare the effects of market volatilities on Stellar and Bayside Corp 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 Bayside Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Bayside Corp.

Diversification Opportunities for Stellar and Bayside Corp

-0.71

Correlation Coefficient

Stellar  Bayside Corp

Pay attention - limited upside

The 3 months correlation between Stellar and Bayside is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Bayside Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayside Corp 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 Bayside Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayside Corp has no effect on the direction of Stellar i.e., Stellar and Bayside Corp go up and down completely randomly.

Pair Corralation between Stellar and Bayside Corp

Assuming the 90 days trading horizon Stellar is expected to generate 1.22 times more return on investment than Bayside Corp. However, Stellar is 1.22 times more volatile than Bayside Corp. It trades about 0.25 of its potential returns per unit of risk. Bayside Corp is currently generating about -0.04 per unit of risk. If you would invest  9.19  in Stellar on October 10, 2024 and sell it today you would earn a total of  32.81  from holding Stellar or generate 357.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Stellar  vs.  Bayside Corp

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.

Bayside Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayside Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Stellar and Bayside Corp

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

The idea behind Stellar and Bayside Corp 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.