Can any of the company-specific risk be diversified away by investing in both P10 and Stifel Financial 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 P10 and Stifel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between P10 Inc and Stifel Financial, you can compare the effects of market volatilities on P10 and Stifel Financial 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 P10 with a short position of Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of P10 and Stifel Financial.
Diversification Opportunities for P10 and Stifel Financial
The 3 months correlation between P10 and Stifel is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding P10 Inc and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and P10 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 P10 Inc are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of P10 i.e., P10 and Stifel Financial go up and down completely randomly.
Allowing for the 90-day total investment horizon P10 Inc is expected to generate 1.74 times more return on investment than Stifel Financial. However, P10 is 1.74 times more volatile than Stifel Financial. It trades about 0.04 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.07 per unit of risk. If you would invest 775.00 in P10 Inc on March 5, 2024 and sell it today you would earn a total of 33.00 from holding P10 Inc or generate 4.26% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in P10 Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, P10 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Stifel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.