Correlation Between Stellar and Innovator Loup

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

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

Diversification Opportunities for Stellar and Innovator Loup

0.77

Correlation Coefficient

Stellar  Innovator Loup

Poor diversification

The 3 months correlation between Stellar and Innovator is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Innovator Loup Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Loup Frontier and Stellar 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 Stellar are associated (or correlated) with Innovator Loup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Loup Frontier has no effect on the direction of Stellar i.e., Stellar and Innovator Loup go up and down completely randomly.

Pair Corralation between Stellar and Innovator Loup

Assuming the 90 days trading horizon Stellar is expected to generate 2.94 times more return on investment than Innovator Loup. However, Stellar is 2.94 times more volatile than Innovator Loup Frontier. It trades about 0.01 of its potential returns per unit of risk. Innovator Loup Frontier is currently generating about 0.03 per unit of risk. If you would invest  17.00  in Stellar on January 26, 2024 and sell it today you would lose (6.00) from holding Stellar or give up 35.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.3%
Values	Daily Returns

Stellar  vs.  Innovator Loup Frontier

Stellar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Stellar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Innovator Loup Frontier

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Loup Frontier are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Loup is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Stellar and Innovator Loup

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

The idea behind Stellar and Innovator Loup Frontier 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 Stocks Directory module to find actively traded stocks across global markets.