Correlation Between Stellar and WHG FINVEST

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

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

Diversification Opportunities for Stellar and WHG FINVEST

0.63

Correlation Coefficient

Stellar  WHG FINVEST

Poor diversification

The 3 months correlation between Stellar and WHG is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and WHG FINVEST SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHG FINVEST SP 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 WHG FINVEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHG FINVEST SP has no effect on the direction of Stellar i.e., Stellar and WHG FINVEST go up and down completely randomly.

Pair Corralation between Stellar and WHG FINVEST

Assuming the 90 days trading horizon Stellar is expected to generate 16.17 times more return on investment than WHG FINVEST. However, Stellar is 16.17 times more volatile than WHG FINVEST SP. It trades about 0.24 of its potential returns per unit of risk. WHG FINVEST SP is currently generating about 0.18 per unit of risk. If you would invest  9.66  in Stellar on October 27, 2024 and sell it today you would earn a total of  33.34  from holding Stellar or generate 345.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.19%
Values	Daily Returns

Stellar  vs.  WHG FINVEST SP

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.

WHG FINVEST SP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WHG FINVEST SP are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak fundamental indicators, WHG FINVEST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stellar and WHG FINVEST

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

The idea behind Stellar and WHG FINVEST SP 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 Transaction History module to view history of all your transactions and understand their impact on performance.