Correlation Between Stepstone and Nature Wood
Can any of the company-specific risk be diversified away by investing in both Stepstone and Nature Wood 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 Nature Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Nature Wood Group, you can compare the effects of market volatilities on Stepstone and Nature Wood 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 Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Nature Wood.
Diversification Opportunities for Stepstone and Nature Wood
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Stepstone and Nature is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group 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 Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of Stepstone i.e., Stepstone and Nature Wood go up and down completely randomly.
Pair Corralation between Stepstone and Nature Wood
Given the investment horizon of 90 days Stepstone Group is expected to generate 0.3 times more return on investment than Nature Wood. However, Stepstone Group is 3.31 times less risky than Nature Wood. It trades about 0.12 of its potential returns per unit of risk. Nature Wood Group is currently generating about -0.04 per unit of risk. If you would invest 2,813 in Stepstone Group on September 12, 2024 and sell it today you would earn a total of 3,347 from holding Stepstone Group or generate 118.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.47% |
| Values | Daily Returns |
Stepstone Group vs. Nature Wood Group
Performance |
| Timeline |
| Stepstone Group |
| Nature Wood Group |
Stepstone and Nature Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Nature Wood
The main advantage of trading using opposite Stepstone and Nature Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Nature Wood 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 Nature Wood will offset losses from the drop in Nature Wood's long position.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| Nature Wood vs. Mativ Holdings | Nature Wood vs. Origin Materials | Nature Wood vs. Waste Management | Nature Wood vs. Stepstone Group |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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