Correlation Between Focus Graphite and Starr Peak

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

By analyzing existing cross correlation between Focus Graphite and Starr Peak Exploration, you can compare the effects of market volatilities on Focus Graphite and Starr Peak 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 Focus Graphite with a short position of Starr Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Graphite and Starr Peak.

Diversification Opportunities for Focus Graphite and Starr Peak

0.41

Correlation Coefficient

Focus Graphite  Starr Peak

Very weak diversification

The 3 months correlation between Focus and Starr is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Starr Peak Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starr Peak Exploration and Focus Graphite 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 Focus Graphite are associated (or correlated) with Starr Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starr Peak Exploration has no effect on the direction of Focus Graphite i.e., Focus Graphite and Starr Peak go up and down completely randomly.

Pair Corralation between Focus Graphite and Starr Peak

Assuming the 90 days horizon Focus Graphite is expected to generate 1.7 times more return on investment than Starr Peak. However, Focus Graphite is 1.7 times more volatile than Starr Peak Exploration. It trades about 0.02 of its potential returns per unit of risk. Starr Peak Exploration is currently generating about -0.01 per unit of risk. If you would invest  8.00  in Focus Graphite on September 12, 2024 and sell it today you would lose (1.00) from holding Focus Graphite or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Focus Graphite  vs.  Starr Peak Exploration

Focus Graphite

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Starr Peak Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Focus Graphite and Starr Peak

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

The idea behind Focus Graphite and Starr Peak Exploration 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 Global Correlations module to find global opportunities by holding instruments from different markets.