Correlation Between Stellar and HUGE Old

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

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

Diversification Opportunities for Stellar and HUGE Old

0.0

Correlation Coefficient

Stellar  HUGE Old

Pay attention - limited upside

The 3 months correlation between Stellar and HUGE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and HUGE Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUGE Old 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 HUGE Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUGE Old has no effect on the direction of Stellar i.e., Stellar and HUGE Old go up and down completely randomly.

Pair Corralation between Stellar and HUGE Old

Assuming the 90 days trading horizon Stellar is expected to generate 0.98 times more return on investment than HUGE Old. However, Stellar is 1.02 times less risky than HUGE Old. It trades about 0.1 of its potential returns per unit of risk. HUGE Old is currently generating about -0.04 per unit of risk. If you would invest  9.03  in Stellar on October 11, 2024 and sell it today you would earn a total of  32.97  from holding Stellar or generate 365.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	74.94%
Values	Daily Returns

Stellar  vs.  HUGE Old

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.

HUGE Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUGE Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, HUGE Old is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stellar and HUGE Old

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

The idea behind Stellar and HUGE Old 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.