Correlation Between Stem and Edgio
Can any of the company-specific risk be diversified away by investing in both Stem and Edgio 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 Edgio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Edgio Inc, you can compare the effects of market volatilities on Stem and Edgio 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 Edgio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Edgio.
Diversification Opportunities for Stem and Edgio
Very weak diversification
The 3 months correlation between Stem and Edgio is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Edgio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgio Inc 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 Edgio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgio Inc has no effect on the direction of Stem i.e., Stem and Edgio go up and down completely randomly.
Pair Corralation between Stem and Edgio
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Edgio. But the stock apears to be less risky and, when comparing its historical volatility, Stem Inc is 37.63 times less risky than Edgio. The stock trades about -0.14 of its potential returns per unit of risk. The Edgio Inc is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Edgio Inc on August 25, 2024 and sell it today you would lose (1.00) from holding Edgio Inc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Stem Inc vs. Edgio Inc
Performance |
| Timeline |
| Stem Inc |
| Edgio Inc |
Stem and Edgio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Edgio
The main advantage of trading using opposite Stem and Edgio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem position performs unexpectedly, Edgio 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 Edgio will offset losses from the drop in Edgio'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |