Correlation Between Stepstone and Genuine Parts
Can any of the company-specific risk be diversified away by investing in both Stepstone and Genuine Parts 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 Genuine Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Genuine Parts Co, you can compare the effects of market volatilities on Stepstone and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Genuine Parts.
Diversification Opportunities for Stepstone and Genuine Parts
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Stepstone and Genuine is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Stepstone i.e., Stepstone and Genuine Parts go up and down completely randomly.
Pair Corralation between Stepstone and Genuine Parts
Given the investment horizon of 90 days Stepstone Group is expected to generate 0.71 times more return on investment than Genuine Parts. However, Stepstone Group is 1.41 times less risky than Genuine Parts. It trades about 0.17 of its potential returns per unit of risk. Genuine Parts Co is currently generating about -0.03 per unit of risk. If you would invest 5,318 in Stepstone Group on August 28, 2024 and sell it today you would earn a total of 1,351 from holding Stepstone Group or generate 25.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Genuine Parts Co
Performance |
| Timeline |
| Stepstone Group |
| Genuine Parts |
Stepstone and Genuine Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Genuine Parts
The main advantage of trading using opposite Stepstone and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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