Correlation Between Lord Global and Stem Holdings
Can any of the company-specific risk be diversified away by investing in both Lord Global and Stem Holdings 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 Lord Global and Stem Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lord Global Corp and Stem Holdings, you can compare the effects of market volatilities on Lord Global and Stem Holdings 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 Lord Global with a short position of Stem Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lord Global and Stem Holdings.
Diversification Opportunities for Lord Global and Stem Holdings
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Lord and Stem is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Lord Global Corp and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and Lord Global 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 Lord Global Corp are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Lord Global i.e., Lord Global and Stem Holdings go up and down completely randomly.
Pair Corralation between Lord Global and Stem Holdings
Given the investment horizon of 90 days Lord Global is expected to generate 20.88 times less return on investment than Stem Holdings. But when comparing it to its historical volatility, Lord Global Corp is 8.37 times less risky than Stem Holdings. It trades about 0.03 of its potential returns per unit of risk. Stem Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1.50 in Stem Holdings on August 30, 2024 and sell it today you would lose (0.50) from holding Stem Holdings or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 60.26% |
| Values | Daily Returns |
Lord Global Corp vs. Stem Holdings
Performance |
| Timeline |
| Lord Global Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Stem Holdings |
Lord Global and Stem Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lord Global and Stem Holdings
The main advantage of trading using opposite Lord Global and Stem Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lord Global position performs unexpectedly, Stem Holdings 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 Stem Holdings will offset losses from the drop in Stem Holdings' long position.| Lord Global vs. Primoris Services | Lord Global vs. SunOpta | Lord Global vs. Jutal Offshore Oil | Lord Global vs. Highway Holdings Limited |
| Stem Holdings vs. Orchid Ventures | Stem Holdings vs. TransCanna Holdings | Stem Holdings vs. BioQuest Corp | Stem Holdings vs. Item 9 Labs |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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