Correlation Between Monarca Minerals and Star Royalties

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

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

Diversification Opportunities for Monarca Minerals and Star Royalties

0.2

Correlation Coefficient

Monarca Minerals  Star Royalties

Modest diversification

The 3 months correlation between Monarca and Star is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Monarca Minerals and Star Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Royalties and Monarca Minerals 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 Monarca Minerals are associated (or correlated) with Star Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Royalties has no effect on the direction of Monarca Minerals i.e., Monarca Minerals and Star Royalties go up and down completely randomly.

Pair Corralation between Monarca Minerals and Star Royalties

Assuming the 90 days horizon Monarca Minerals is expected to generate 2.66 times more return on investment than Star Royalties. However, Monarca Minerals is 2.66 times more volatile than Star Royalties. It trades about 0.14 of its potential returns per unit of risk. Star Royalties is currently generating about -0.18 per unit of risk. If you would invest  0.40  in Monarca Minerals on September 5, 2024 and sell it today you would earn a total of  0.09  from holding Monarca Minerals or generate 22.5% return on investment over 90 days.

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

Monarca Minerals  vs.  Star Royalties

Monarca Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monarca Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Monarca Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Star Royalties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Star Royalties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Star Royalties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monarca Minerals and Star Royalties

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

The idea behind Monarca Minerals and Star Royalties 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.