Correlation Between Stepstone and Timken
Can any of the company-specific risk be diversified away by investing in both Stepstone and Timken 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 Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Timken Company, you can compare the effects of market volatilities on Stepstone and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Timken.
Diversification Opportunities for Stepstone and Timken
Very good diversification
The 3 months correlation between Stepstone and Timken is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Stepstone i.e., Stepstone and Timken go up and down completely randomly.
Pair Corralation between Stepstone and Timken
Given the investment horizon of 90 days Stepstone Group is expected to generate 0.81 times more return on investment than Timken. However, Stepstone Group is 1.23 times less risky than Timken. It trades about 0.19 of its potential returns per unit of risk. Timken Company is currently generating about -0.07 per unit of risk. If you would invest 5,900 in Stepstone Group on September 2, 2024 and sell it today you would earn a total of 689.00 from holding Stepstone Group or generate 11.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Timken Company
Performance |
| Timeline |
| Stepstone Group |
| Timken Company |
Stepstone and Timken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Timken
The main advantage of trading using opposite Stepstone and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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