Correlation Between Cardno and Step One

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

By analyzing existing cross correlation between Cardno and Step One Clothing, you can compare the effects of market volatilities on Cardno and Step One 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 Cardno with a short position of Step One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardno and Step One.

Diversification Opportunities for Cardno and Step One

0.77

Correlation Coefficient

Cardno  Step One

Poor diversification

The 3 months correlation between Cardno and Step is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cardno and Step One Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Step One Clothing and Cardno 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 Cardno are associated (or correlated) with Step One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Step One Clothing has no effect on the direction of Cardno i.e., Cardno and Step One go up and down completely randomly.

Pair Corralation between Cardno and Step One

Assuming the 90 days trading horizon Cardno is expected to generate 3.52 times more return on investment than Step One. However, Cardno is 3.52 times more volatile than Step One Clothing. It trades about -0.01 of its potential returns per unit of risk. Step One Clothing is currently generating about -0.22 per unit of risk. If you would invest  33.00  in Cardno on September 25, 2024 and sell it today you would lose (10.00) from holding Cardno or give up 30.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cardno  vs.  Step One Clothing

Cardno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Cardno is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Step One Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Step One Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cardno and Step One

The main advantage of trading using opposite Cardno and Step One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardno position performs unexpectedly, Step One 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 Step One will offset losses from the drop in Step One's long position.

The idea behind Cardno and Step One Clothing 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.