Correlation Between Flexible Solutions and Stepstone

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

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

Diversification Opportunities for Flexible Solutions and Stepstone

0.84

Correlation Coefficient

Flexible Solutions  Stepstone

Very poor diversification

The 3 months correlation between Flexible and Stepstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and Stepstone go up and down completely randomly.

Pair Corralation between Flexible Solutions and Stepstone

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 1.61 times more return on investment than Stepstone. However, Flexible Solutions is 1.61 times more volatile than Stepstone Group. It trades about 0.12 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.15 per unit of risk. If you would invest  317.00  in Flexible Solutions International on September 4, 2024 and sell it today you would earn a total of  82.00  from holding Flexible Solutions International or generate 25.87% return on investment over 90 days.

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

Flexible Solutions Internation  vs.  Stepstone Group

Flexible Solutions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Stepstone Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 11 (%) 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 Flexible Solutions and Stepstone

The main advantage of trading using opposite Flexible Solutions and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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 Flexible Solutions International 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.