Correlation Between Stelar Metals and Otto Energy
Can any of the company-specific risk be diversified away by investing in both Stelar Metals and Otto Energy 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 Stelar Metals and Otto Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stelar Metals and Otto Energy, you can compare the effects of market volatilities on Stelar Metals and Otto Energy 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 Stelar Metals with a short position of Otto Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stelar Metals and Otto Energy.
Diversification Opportunities for Stelar Metals and Otto Energy
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stelar and Otto is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and Otto Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto Energy and Stelar Metals 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 Stelar Metals are associated (or correlated) with Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy has no effect on the direction of Stelar Metals i.e., Stelar Metals and Otto Energy go up and down completely randomly.
Pair Corralation between Stelar Metals and Otto Energy
Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the Otto Energy. But the stock apears to be less risky and, when comparing its historical volatility, Stelar Metals is 1.15 times less risky than Otto Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Otto Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1.70 in Otto Energy on September 12, 2024 and sell it today you would lose (0.50) from holding Otto Energy or give up 29.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stelar Metals vs. Otto Energy
Performance |
| Timeline |
| Stelar Metals |
| Otto Energy |
Stelar Metals and Otto Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stelar Metals and Otto Energy
The main advantage of trading using opposite Stelar Metals and Otto Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stelar Metals position performs unexpectedly, Otto Energy 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 Otto Energy will offset losses from the drop in Otto Energy's long position.| Stelar Metals vs. Perseus Mining | Stelar Metals vs. Bailador Technology Invest | Stelar Metals vs. Black Rock Mining | Stelar Metals vs. Aristocrat Leisure |
| Otto Energy vs. Computershare | Otto Energy vs. EVE Health Group | Otto Energy vs. Global Health | Otto Energy vs. Regis Healthcare |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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