Correlation Between StoneCo and Stem
Can any of the company-specific risk be diversified away by investing in both StoneCo and Stem 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 StoneCo and Stem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between StoneCo and Stem Inc, you can compare the effects of market volatilities on StoneCo and Stem 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 StoneCo with a short position of Stem. Check out your portfolio center. Please also check ongoing floating volatility patterns of StoneCo and Stem.
Diversification Opportunities for StoneCo and Stem
Very weak diversification
The 3 months correlation between StoneCo and Stem is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Stem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Inc and StoneCo 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 StoneCo are associated (or correlated) with Stem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Inc has no effect on the direction of StoneCo i.e., StoneCo and Stem go up and down completely randomly.
Pair Corralation between StoneCo and Stem
Given the investment horizon of 90 days StoneCo is expected to generate 0.31 times more return on investment than Stem. However, StoneCo is 3.2 times less risky than Stem. It trades about -0.07 of its potential returns per unit of risk. Stem Inc is currently generating about -0.06 per unit of risk. If you would invest 1,322 in StoneCo on September 3, 2024 and sell it today you would lose (349.00) from holding StoneCo or give up 26.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
StoneCo vs. Stem Inc
Performance |
| Timeline |
| StoneCo |
| Stem Inc |
StoneCo and Stem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with StoneCo and Stem
The main advantage of trading using opposite StoneCo and Stem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if StoneCo position performs unexpectedly, Stem 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 Stem will offset losses from the drop in Stem's long position.| StoneCo vs. Upstart Holdings | StoneCo vs. SoFi Technologies | StoneCo vs. Roblox Corp | StoneCo vs. Robinhood Markets |
| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir Technologies Class |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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