Correlation Between Stellar and Inspired Plc

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

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

Diversification Opportunities for Stellar and Inspired Plc

-0.31

Correlation Coefficient

Stellar  Inspired Plc

Very good diversification

The 3 months correlation between Stellar and Inspired is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Inspired Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Plc 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 Inspired Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Plc has no effect on the direction of Stellar i.e., Stellar and Inspired Plc go up and down completely randomly.

Pair Corralation between Stellar and Inspired Plc

Assuming the 90 days trading horizon Stellar is expected to generate 11.08 times less return on investment than Inspired Plc. In addition to that, Stellar is 2.58 times more volatile than Inspired Plc. It trades about 0.01 of its total potential returns per unit of risk. Inspired Plc is currently generating about 0.22 per unit of volatility. If you would invest  4,100  in Inspired Plc on October 10, 2024 and sell it today you would earn a total of  550.00  from holding Inspired Plc or generate 13.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Stellar  vs.  Inspired Plc

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) 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.

Inspired Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspired Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stellar and Inspired Plc

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

The idea behind Stellar and Inspired Plc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.