Correlation Between Dell Technologies and Stepstone

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

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

Diversification Opportunities for Dell Technologies and Stepstone

0.89

Correlation Coefficient

Dell Technologies  Stepstone

Very poor diversification

The 3 months correlation between Dell and Stepstone is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and Stepstone go up and down completely randomly.

Pair Corralation between Dell Technologies and Stepstone

Given the investment horizon of 90 days Dell Technologies is expected to generate 1.49 times less return on investment than Stepstone. In addition to that, Dell Technologies is 1.38 times more volatile than Stepstone Group. It trades about 0.08 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.16 per unit of volatility. If you would invest  5,379  in Stepstone Group on August 31, 2024 and sell it today you would earn a total of  1,225  from holding Stepstone Group or generate 22.77% return on investment over 90 days.

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

Dell Technologies  vs.  Stepstone Group

Dell Technologies

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dell Technologies and Stepstone

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

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.