Correlation Between Stemtech and Insight Enterprises

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

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

Diversification Opportunities for Stemtech and Insight Enterprises

-0.33

Correlation Coefficient

Stemtech  Insight Enterprises

Very good diversification

The 3 months correlation between Stemtech and Insight is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stemtech and Insight Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insight Enterprises and Stemtech 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 Stemtech are associated (or correlated) with Insight Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insight Enterprises has no effect on the direction of Stemtech i.e., Stemtech and Insight Enterprises go up and down completely randomly.

Pair Corralation between Stemtech and Insight Enterprises

Given the investment horizon of 90 days Stemtech is expected to under-perform the Insight Enterprises. In addition to that, Stemtech is 17.44 times more volatile than Insight Enterprises. It trades about -0.03 of its total potential returns per unit of risk. Insight Enterprises is currently generating about 0.02 per unit of volatility. If you would invest  18,248  in Insight Enterprises on January 24, 2024 and sell it today you would earn a total of  49.00  from holding Insight Enterprises or generate 0.27% return on investment over 90 days.

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

Stemtech  vs.  Insight Enterprises

Stemtech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stemtech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Stemtech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Insight Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Stemtech and Insight Enterprises

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

The idea behind Stemtech and Insight Enterprises 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.