Correlation Between Stellar and Tweedy Browne

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

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

Diversification Opportunities for Stellar and Tweedy Browne

-0.75

Correlation Coefficient

Stellar  Tweedy Browne

Pay attention - limited upside

The 3 months correlation between Stellar and Tweedy is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Tweedy Browne Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Worldwide 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 Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Worldwide has no effect on the direction of Stellar i.e., Stellar and Tweedy Browne go up and down completely randomly.

Pair Corralation between Stellar and Tweedy Browne

Assuming the 90 days trading horizon Stellar is expected to under-perform the Tweedy Browne. In addition to that, Stellar is 8.96 times more volatile than Tweedy Browne Worldwide. It trades about -0.02 of its total potential returns per unit of risk. Tweedy Browne Worldwide is currently generating about 0.24 per unit of volatility. If you would invest  537.00  in Tweedy Browne Worldwide on December 20, 2024 and sell it today you would earn a total of  58.00  from holding Tweedy Browne Worldwide or generate 10.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Stellar  vs.  Tweedy Browne Worldwide

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.

Tweedy Browne Worldwide

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tweedy Browne Worldwide are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Tweedy Browne may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stellar and Tweedy Browne

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

The idea behind Stellar and Tweedy Browne Worldwide 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.