Correlation Between Step One and Environmental
Can any of the company-specific risk be diversified away by investing in both Step One and Environmental 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 Step One and Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Step One Clothing and The Environmental Group, you can compare the effects of market volatilities on Step One and Environmental 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 Step One with a short position of Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Step One and Environmental.
Diversification Opportunities for Step One and Environmental
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Step and Environmental is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Step One Clothing and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental and Step One 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 Step One Clothing are associated (or correlated) with Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of Step One i.e., Step One and Environmental go up and down completely randomly.
Pair Corralation between Step One and Environmental
Assuming the 90 days trading horizon Step One Clothing is expected to under-perform the Environmental. In addition to that, Step One is 1.23 times more volatile than The Environmental Group. It trades about -0.06 of its total potential returns per unit of risk. The Environmental Group is currently generating about 0.07 per unit of volatility. If you would invest 27.00 in The Environmental Group on September 15, 2024 and sell it today you would earn a total of 1.00 from holding The Environmental Group or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Step One Clothing vs. The Environmental Group
Performance |
| Timeline |
| Step One Clothing |
| The Environmental |
Step One and Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Step One and Environmental
The main advantage of trading using opposite Step One and Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Step One position performs unexpectedly, Environmental 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 Environmental will offset losses from the drop in Environmental's long position.| Step One vs. Wt Financial Group | Step One vs. Insignia Financial | Step One vs. EP Financial Group | Step One vs. National Australia Bank |
| Environmental vs. Auswide Bank | Environmental vs. Step One Clothing | Environmental vs. Bisalloy Steel Group | Environmental vs. National Australia Bank |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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