Correlation Between SPCG Public and Star Petroleum

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

By analyzing existing cross correlation between SPCG Public and Star Petroleum Refining, you can compare the effects of market volatilities on SPCG Public and Star Petroleum 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 SPCG Public with a short position of Star Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPCG Public and Star Petroleum.

Diversification Opportunities for SPCG Public and Star Petroleum

0.8

Correlation Coefficient

SPCG Public  Star Petroleum

Very poor diversification

The 3 months correlation between SPCG and Star is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPCG Public and Star Petroleum Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Petroleum Refining and SPCG Public 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 SPCG Public are associated (or correlated) with Star Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Petroleum Refining has no effect on the direction of SPCG Public i.e., SPCG Public and Star Petroleum go up and down completely randomly.

Pair Corralation between SPCG Public and Star Petroleum

Assuming the 90 days trading horizon SPCG Public is expected to under-perform the Star Petroleum. In addition to that, SPCG Public is 20.72 times more volatile than Star Petroleum Refining. It trades about -0.24 of its total potential returns per unit of risk. Star Petroleum Refining is currently generating about -0.23 per unit of volatility. If you would invest  809.00  in Star Petroleum Refining on January 28, 2024 and sell it today you would lose (4.00) from holding Star Petroleum Refining or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

SPCG Public  vs.  Star Petroleum Refining

SPCG Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPCG Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Star Petroleum Refining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Petroleum Refining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Star Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPCG Public and Star Petroleum

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

The idea behind SPCG Public and Star Petroleum Refining 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.