Correlation Between Stepstone and Stratasys

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

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

Diversification Opportunities for Stepstone and Stratasys

-0.51

Correlation Coefficient

Stepstone  Stratasys

Excellent diversification

The 3 months correlation between Stepstone and Stratasys is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys and Stepstone 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 Stepstone Group are associated (or correlated) with Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of Stepstone i.e., Stepstone and Stratasys go up and down completely randomly.

Pair Corralation between Stepstone and Stratasys

Given the investment horizon of 90 days Stepstone Group is expected to generate 0.87 times more return on investment than Stratasys. However, Stepstone Group is 1.15 times less risky than Stratasys. It trades about 0.11 of its potential returns per unit of risk. Stratasys is currently generating about -0.24 per unit of risk. If you would invest  3,483  in Stepstone Group on January 29, 2024 and sell it today you would earn a total of  162.00  from holding Stepstone Group or generate 4.65% return on investment over 90 days.

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

Stepstone Group  vs.  Stratasys

Stepstone Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Stratasys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stratasys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Stepstone and Stratasys

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

The idea behind Stepstone Group and Stratasys 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.