Correlation Between Rand Capital and Stepstone

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

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

Diversification Opportunities for Rand Capital and Stepstone

-0.02

Correlation Coefficient

Rand Capital  Stepstone

Good diversification

The 3 months correlation between Rand and Stepstone is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Rand 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 Rand Capital Corp 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 Rand Capital i.e., Rand Capital and Stepstone go up and down completely randomly.

Pair Corralation between Rand Capital and Stepstone

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 2.58 times more return on investment than Stepstone. However, Rand Capital is 2.58 times more volatile than Stepstone Group. It trades about 0.44 of its potential returns per unit of risk. Stepstone Group is currently generating about -0.04 per unit of risk. If you would invest  1,614  in Rand Capital Corp on September 17, 2024 and sell it today you would earn a total of  666.00  from holding Rand Capital Corp or generate 41.26% return on investment over 90 days.

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

Rand Capital Corp  vs.  Stepstone Group

Rand Capital Corp

Risk-Adjusted Performance

7 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Rand Capital and Stepstone

The main advantage of trading using opposite Rand Capital and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.