Correlation Between Star Equity and ProPhase Labs

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

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

Diversification Opportunities for Star Equity and ProPhase Labs

0.9

Correlation Coefficient

Star Equity  ProPhase Labs

Almost no diversification

The 3 months correlation between Star and ProPhase is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Star Equity Holdings and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs and Star Equity 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 Equity Holdings are associated (or correlated) with ProPhase Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPhase Labs has no effect on the direction of Star Equity i.e., Star Equity and ProPhase Labs go up and down completely randomly.

Pair Corralation between Star Equity and ProPhase Labs

Given the investment horizon of 90 days Star Equity Holdings is expected to generate 0.58 times more return on investment than ProPhase Labs. However, Star Equity Holdings is 1.74 times less risky than ProPhase Labs. It trades about -0.11 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.11 per unit of risk. If you would invest  615.00  in Star Equity Holdings on September 28, 2024 and sell it today you would lose (397.00) from holding Star Equity Holdings or give up 64.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

Star Equity Holdings  vs.  ProPhase Labs

Star Equity Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Equity Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ProPhase Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProPhase Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Star Equity and ProPhase Labs

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

The idea behind Star Equity Holdings and ProPhase Labs 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.