Correlation Between Steward Small and Steward Large

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

By analyzing existing cross correlation between Steward Small Mid Cap and Steward Large Cap, you can compare the effects of market volatilities on Steward Small and Steward Large 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 Steward Small with a short position of Steward Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Small and Steward Large.

Diversification Opportunities for Steward Small and Steward Large

0.94

Correlation Coefficient

Steward Small  Steward Large

Almost no diversification

The 3 months correlation between Steward and Steward is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Steward Small Mid Cap and Steward Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Large Cap and Steward Small 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 Steward Small Mid Cap are associated (or correlated) with Steward Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Large Cap has no effect on the direction of Steward Small i.e., Steward Small and Steward Large go up and down completely randomly.

Pair Corralation between Steward Small and Steward Large

Assuming the 90 days horizon Steward Small is expected to generate 2.2 times less return on investment than Steward Large. In addition to that, Steward Small is 1.1 times more volatile than Steward Large Cap. It trades about 0.05 of its total potential returns per unit of risk. Steward Large Cap is currently generating about 0.13 per unit of volatility. If you would invest  2,539  in Steward Large Cap on September 14, 2024 and sell it today you would earn a total of  860.00  from holding Steward Large Cap or generate 33.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Steward Small Mid Cap  vs.  Steward Large Cap

Steward Small Mid

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steward Large Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Steward Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steward Small and Steward Large

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

The idea behind Steward Small Mid Cap and Steward Large Cap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.