Correlation Between Stem and Qualys

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

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

Diversification Opportunities for Stem and Qualys

-0.44

Correlation Coefficient

Stem  Qualys

Very good diversification

The 3 months correlation between Stem and Qualys is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Qualys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualys Inc and Stem 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 Stem Inc are associated (or correlated) with Qualys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualys Inc has no effect on the direction of Stem i.e., Stem and Qualys go up and down completely randomly.

Pair Corralation between Stem and Qualys

Given the investment horizon of 90 days Stem Inc is expected to under-perform the Qualys. In addition to that, Stem is 3.02 times more volatile than Qualys Inc. It trades about -0.06 of its total potential returns per unit of risk. Qualys Inc is currently generating about 0.04 per unit of volatility. If you would invest  11,079  in Qualys Inc on September 12, 2024 and sell it today you would earn a total of  4,309  from holding Qualys Inc or generate 38.89% return on investment over 90 days.

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

Stem Inc  vs.  Qualys Inc

Stem Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Stem may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Qualys Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qualys Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Qualys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stem and Qualys

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

The idea behind Stem Inc and Qualys Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.