Correlation Between Stem and Endava
Can any of the company-specific risk be diversified away by investing in both Stem and Endava 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 Stem and Endava into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Endava, you can compare the effects of market volatilities on Stem and Endava 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 Stem with a short position of Endava. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Endava.
Diversification Opportunities for Stem and Endava
Modest diversification
The 3 months correlation between Stem and Endava is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Endava in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endava and Stem 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 Stem Inc are associated (or correlated) with Endava. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endava has no effect on the direction of Stem i.e., Stem and Endava go up and down completely randomly.
Pair Corralation between Stem and Endava
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Endava. In addition to that, Stem is 3.13 times more volatile than Endava. It trades about -0.01 of its total potential returns per unit of risk. Endava is currently generating about -0.03 per unit of volatility. If you would invest 3,151 in Endava on August 28, 2024 and sell it today you would lose (252.00) from holding Endava or give up 8.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stem Inc vs. Endava
Performance |
| Timeline |
| Stem Inc |
| Endava |
Stem and Endava Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Endava
The main advantage of trading using opposite Stem and Endava positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem position performs unexpectedly, Endava 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 Endava will offset losses from the drop in Endava's long position.| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir Technologies |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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