Correlation Between Steward Select and Steward Large

Can any of the company-specific risk be diversified away by investing in both Steward Select 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 Select 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 Select Bond and Steward Large Cap, you can compare the effects of market volatilities on Steward Select 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 Select with a short position of Steward Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Select and Steward Large.

Diversification Opportunities for Steward Select and Steward Large

-0.65

Correlation Coefficient

Steward Select  Steward Large

Excellent diversification

The 3 months correlation between Steward and Steward is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Steward Select Bond 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 Select 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 Select Bond 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 Select i.e., Steward Select and Steward Large go up and down completely randomly.

Pair Corralation between Steward Select and Steward Large

Assuming the 90 days horizon Steward Select Bond is expected to under-perform the Steward Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Steward Select Bond is 2.9 times less risky than Steward Large. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Steward Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,791  in Steward Large Cap on September 4, 2024 and sell it today you would earn a total of  274.00  from holding Steward Large Cap or generate 9.82% return on investment over 90 days.

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

Steward Select Bond  vs.  Steward Large Cap

Steward Select Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steward Select Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Steward Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steward Large Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Steward Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steward Select and Steward Large

The main advantage of trading using opposite Steward Select and Steward Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steward Select 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 Select Bond 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.