Correlation Between Standard and Stoneridge
Can any of the company-specific risk be diversified away by investing in both Standard and Stoneridge 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 Standard and Stoneridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and Stoneridge, you can compare the effects of market volatilities on Standard and Stoneridge 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 Standard with a short position of Stoneridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and Stoneridge.
Diversification Opportunities for Standard and Stoneridge
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Standard and Stoneridge is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Stoneridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoneridge and Standard 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 Standard Motor Products are associated (or correlated) with Stoneridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoneridge has no effect on the direction of Standard i.e., Standard and Stoneridge go up and down completely randomly.
Pair Corralation between Standard and Stoneridge
Considering the 90-day investment horizon Standard Motor Products is expected to generate 0.72 times more return on investment than Stoneridge. However, Standard Motor Products is 1.39 times less risky than Stoneridge. It trades about 0.02 of its potential returns per unit of risk. Stoneridge is currently generating about -0.26 per unit of risk. If you would invest 3,160 in Standard Motor Products on August 23, 2024 and sell it today you would earn a total of 57.00 from holding Standard Motor Products or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. Stoneridge
Performance |
| Timeline |
| Standard Motor Products |
| Stoneridge |
Standard and Stoneridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and Stoneridge
The main advantage of trading using opposite Standard and Stoneridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard position performs unexpectedly, Stoneridge 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 Stoneridge will offset losses from the drop in Stoneridge's long position.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
| Stoneridge vs. Monro Muffler Brake | Stoneridge vs. Motorcar Parts of | Stoneridge vs. Standard Motor Products | Stoneridge vs. Douglas Dynamics |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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