Correlation Between Stellar and SecureTech Innovations

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

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

Diversification Opportunities for Stellar and SecureTech Innovations

0.01

Correlation Coefficient

Stellar  SecureTech Innovations

Significant diversification

The 3 months correlation between Stellar and SecureTech is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SecureTech Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SecureTech Innovations 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 SecureTech Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SecureTech Innovations has no effect on the direction of Stellar i.e., Stellar and SecureTech Innovations go up and down completely randomly.

Pair Corralation between Stellar and SecureTech Innovations

Assuming the 90 days trading horizon Stellar is expected to generate 6.49 times less return on investment than SecureTech Innovations. But when comparing it to its historical volatility, Stellar is 4.02 times less risky than SecureTech Innovations. It trades about 0.11 of its potential returns per unit of risk. SecureTech Innovations is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  100.00  in SecureTech Innovations on October 23, 2024 and sell it today you would earn a total of  40.00  from holding SecureTech Innovations or generate 40.0% return on investment over 90 days.

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

Stellar  vs.  SecureTech Innovations

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.

SecureTech Innovations

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SecureTech Innovations are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, SecureTech Innovations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and SecureTech Innovations

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

The idea behind Stellar and SecureTech Innovations 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.