Correlation Between Critical Elements and South Star

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

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

Diversification Opportunities for Critical Elements and South Star

0.58

Correlation Coefficient

Critical Elements  South Star

Very weak diversification

The 3 months correlation between Critical and South is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and South Star Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Star Battery and Critical Elements 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 Critical Elements are associated (or correlated) with South Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Star Battery has no effect on the direction of Critical Elements i.e., Critical Elements and South Star go up and down completely randomly.

Pair Corralation between Critical Elements and South Star

Assuming the 90 days horizon Critical Elements is expected to under-perform the South Star. But the otc stock apears to be less risky and, when comparing its historical volatility, Critical Elements is 1.44 times less risky than South Star. The otc stock trades about -0.28 of its potential returns per unit of risk. The South Star Battery is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  40.00  in South Star Battery on September 15, 2024 and sell it today you would lose (5.00) from holding South Star Battery or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Critical Elements  vs.  South Star Battery

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Critical Elements has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Critical Elements is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

South Star Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Star Battery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Critical Elements and South Star

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

The idea behind Critical Elements and South Star Battery 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 Global Correlations module to find global opportunities by holding instruments from different markets.