Correlation Between Stellar and IRIS

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

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

Diversification Opportunities for Stellar and IRIS

0.62

Correlation Coefficient

Stellar  IRIS

Poor diversification

The 3 months correlation between Stellar and IRIS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and IRIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IRIS 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 IRIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IRIS has no effect on the direction of Stellar i.e., Stellar and IRIS go up and down completely randomly.

Pair Corralation between Stellar and IRIS

Assuming the 90 days trading horizon Stellar is expected to generate 0.57 times more return on investment than IRIS. However, Stellar is 1.75 times less risky than IRIS. It trades about -0.02 of its potential returns per unit of risk. IRIS is currently generating about -0.05 per unit of risk. If you would invest  33.00  in Stellar on December 30, 2024 and sell it today you would lose (6.00) from holding Stellar or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Stellar  vs.  IRIS

Stellar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Stellar shareholders.

IRIS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stellar and IRIS

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

The idea behind Stellar and IRIS 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.