Correlation Between Star Royalties and American Clean

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

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

Diversification Opportunities for Star Royalties and American Clean

-0.49

Correlation Coefficient

Star Royalties  American Clean

Very good diversification

The 3 months correlation between Star and American is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Star Royalties and American Clean Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Clean Resources and Star Royalties 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 Star Royalties are associated (or correlated) with American Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Clean Resources has no effect on the direction of Star Royalties i.e., Star Royalties and American Clean go up and down completely randomly.

Pair Corralation between Star Royalties and American Clean

Assuming the 90 days horizon Star Royalties is expected to generate 0.75 times more return on investment than American Clean. However, Star Royalties is 1.33 times less risky than American Clean. It trades about 0.06 of its potential returns per unit of risk. American Clean Resources is currently generating about -0.13 per unit of risk. If you would invest  20.00  in Star Royalties on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Star Royalties or generate 10.0% return on investment over 90 days.

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

Star Royalties  vs.  American Clean Resources

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.

American Clean Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Clean Resources 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 basic indicators 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 Star Royalties and American Clean

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

The idea behind Star Royalties and American Clean Resources 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.