Correlation Between Star Gas and Adams Resources

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

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

Diversification Opportunities for Star Gas and Adams Resources

-0.46

Correlation Coefficient

Star Gas  Adams Resources

Very good diversification

The 3 months correlation between Star and Adams is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Star Gas Partners and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and Star Gas 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 Gas Partners are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Star Gas i.e., Star Gas and Adams Resources go up and down completely randomly.

Pair Corralation between Star Gas and Adams Resources

Considering the 90-day investment horizon Star Gas Partners is expected to generate 1.2 times more return on investment than Adams Resources. However, Star Gas is 1.2 times more volatile than Adams Resources Energy. It trades about 0.17 of its potential returns per unit of risk. Adams Resources Energy is currently generating about 0.11 per unit of risk. If you would invest  1,035  in Star Gas Partners on January 30, 2024 and sell it today you would earn a total of  83.00  from holding Star Gas Partners or generate 8.02% return on investment over 90 days.

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

Star Gas Partners  vs.  Adams Resources Energy

Star Gas Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Gas Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Star Gas is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Adams Resources Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Star Gas and Adams Resources

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

The idea behind Star Gas Partners and Adams Resources Energy 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.