Correlation Between RIV Capital and Stem Holdings

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

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

Diversification Opportunities for RIV Capital and Stem Holdings

0.0

Correlation Coefficient

RIV Capital  Stem Holdings

Pay attention - limited upside

The 3 months correlation between RIV and Stem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding RIV Capital and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and RIV Capital 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 RIV Capital are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of RIV Capital i.e., RIV Capital and Stem Holdings go up and down completely randomly.

Pair Corralation between RIV Capital and Stem Holdings

Assuming the 90 days horizon RIV Capital is expected to generate 24.44 times less return on investment than Stem Holdings. But when comparing it to its historical volatility, RIV Capital is 8.98 times less risky than Stem Holdings. It trades about 0.03 of its potential returns per unit of risk. Stem Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Stem Holdings on September 20, 2024 and sell it today you would earn a total of  0.70  from holding Stem Holdings or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

RIV Capital  vs.  Stem Holdings

RIV Capital

Risk-Adjusted Performance

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Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Stem Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RIV Capital and Stem Holdings

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

The idea behind RIV Capital and Stem Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.