Correlation Between Aldel Financial and Stepstone

Can any of the company-specific risk be diversified away by investing in both Aldel Financial 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 Aldel Financial and Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Stepstone Group, you can compare the effects of market volatilities on Aldel Financial 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 Aldel Financial with a short position of Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Stepstone.

Diversification Opportunities for Aldel Financial and Stepstone

-0.61

Correlation Coefficient

Aldel Financial  Stepstone

Excellent diversification

The 3 months correlation between Aldel and Stepstone is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Stepstone go up and down completely randomly.

Pair Corralation between Aldel Financial and Stepstone

Assuming the 90 days horizon Aldel Financial is expected to generate 25.51 times less return on investment than Stepstone. But when comparing it to its historical volatility, Aldel Financial II is 20.6 times less risky than Stepstone. It trades about 0.1 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,444  in Stepstone Group on September 17, 2024 and sell it today you would earn a total of  919.50  from holding Stepstone Group or generate 16.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	60.0%
Values	Daily Returns

Aldel Financial II  vs.  Stepstone Group

Aldel Financial II

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Stepstone Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aldel Financial and Stepstone

The main advantage of trading using opposite Aldel Financial and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.