Correlation Between Timken and Stepstone
Can any of the company-specific risk be diversified away by investing in both Timken and Stepstone 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 Timken and Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Stepstone Group, you can compare the effects of market volatilities on Timken and Stepstone 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 Timken with a short position of Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Stepstone.
Diversification Opportunities for Timken and Stepstone
Very good diversification
The 3 months correlation between Timken and Stepstone is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Timken 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 Timken Company are associated (or correlated) with Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Timken i.e., Timken and Stepstone go up and down completely randomly.
Pair Corralation between Timken and Stepstone
Considering the 90-day investment horizon Timken Company is expected to under-perform the Stepstone. In addition to that, Timken is 1.23 times more volatile than Stepstone Group. It trades about -0.07 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.19 per unit of volatility. 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 |
Timken Company vs. Stepstone Group
Performance |
| Timeline |
| Timken Company |
| Stepstone Group |
Timken and Stepstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Stepstone
The main advantage of trading using opposite Timken and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Stepstone 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 Stepstone will offset losses from the drop in Stepstone's long position.The idea behind Timken Company and Stepstone Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |