Correlation Between Starfleet Innotech and Princeton Capital

Can any of the company-specific risk be diversified away by investing in both Starfleet Innotech and Princeton Capital 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 Starfleet Innotech and Princeton Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Starfleet Innotech and Princeton Capital

-0.41

Correlation Coefficient

Starfleet Innotech  Princeton Capital

Very good diversification

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

Pair Corralation between Starfleet Innotech and Princeton Capital

Given the investment horizon of 90 days Starfleet Innotech is expected to generate 2.44 times more return on investment than Princeton Capital. However, Starfleet Innotech is 2.44 times more volatile than Princeton Capital. It trades about 0.07 of its potential returns per unit of risk. Princeton Capital is currently generating about 0.04 per unit of risk. If you would invest  0.31  in Starfleet Innotech on September 27, 2024 and sell it today you would lose (0.05) from holding Starfleet Innotech or give up 16.13% of portfolio value over 90 days.

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

Starfleet Innotech  vs.  Princeton Capital

Starfleet Innotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Starfleet Innotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Starfleet Innotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Princeton Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Princeton Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Starfleet Innotech and Princeton Capital

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

The idea behind Starfleet Innotech and Princeton Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.