Correlation Between Stepstone and Western Acquisition
Can any of the company-specific risk be diversified away by investing in both Stepstone and Western Acquisition 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 Western Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Western Acquisition Ventures, you can compare the effects of market volatilities on Stepstone and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Western Acquisition.
Diversification Opportunities for Stepstone and Western Acquisition
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stepstone and Western is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Stepstone i.e., Stepstone and Western Acquisition go up and down completely randomly.
Pair Corralation between Stepstone and Western Acquisition
Given the investment horizon of 90 days Stepstone Group is expected to generate 1.28 times more return on investment than Western Acquisition. However, Stepstone is 1.28 times more volatile than Western Acquisition Ventures. It trades about 0.16 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.01 per unit of risk. If you would invest 4,425 in Stepstone Group on September 1, 2024 and sell it today you would earn a total of 2,164 from holding Stepstone Group or generate 48.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Western Acquisition Ventures
Performance |
| Timeline |
| Stepstone Group |
| Western Acquisition |
Stepstone and Western Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Western Acquisition
The main advantage of trading using opposite Stepstone and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Western Acquisition 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 Western Acquisition will offset losses from the drop in Western Acquisition's long position.| Stepstone vs. Visa Class A | Stepstone vs. Diamond Hill Investment | Stepstone vs. Distoken Acquisition | Stepstone vs. Associated Capital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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