Correlation Between Steward Small and Steward International

Can any of the company-specific risk be diversified away by investing in both Steward Small and Steward International 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 International 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 International Enhanced, you can compare the effects of market volatilities on Steward Small and Steward International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Small and Steward International.

Diversification Opportunities for Steward Small and Steward International

-0.3

Correlation Coefficient

Steward Small  Steward International

Very good diversification

The 3 months correlation between Steward and Steward is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Steward Small Mid Cap and Steward International Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward International has no effect on the direction of Steward Small i.e., Steward Small and Steward International go up and down completely randomly.

Pair Corralation between Steward Small and Steward International

Assuming the 90 days horizon Steward Small Mid Cap is expected to generate 1.36 times more return on investment than Steward International. However, Steward Small is 1.36 times more volatile than Steward International Enhanced. It trades about 0.13 of its potential returns per unit of risk. Steward International Enhanced is currently generating about 0.01 per unit of risk. If you would invest  1,162  in Steward Small Mid Cap on September 14, 2024 and sell it today you would earn a total of  96.00  from holding Steward Small Mid Cap or generate 8.26% return on investment over 90 days.

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

Steward Small Mid Cap  vs.  Steward International Enhanced

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 basic indicators, Steward Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Steward International

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steward International Enhanced are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Steward International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Steward Small and Steward International

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

The idea behind Steward Small Mid Cap and Steward International Enhanced 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.