Correlation Between Stepstone and Pactiv Evergreen

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

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

Diversification Opportunities for Stepstone and Pactiv Evergreen

-0.01

Correlation Coefficient

Stepstone  Pactiv Evergreen

Good diversification

The 3 months correlation between Stepstone and Pactiv is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Pactiv Evergreen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pactiv Evergreen and Stepstone 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 Stepstone Group are associated (or correlated) with Pactiv Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pactiv Evergreen has no effect on the direction of Stepstone i.e., Stepstone and Pactiv Evergreen go up and down completely randomly.

Pair Corralation between Stepstone and Pactiv Evergreen

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the Pactiv Evergreen. But the stock apears to be less risky and, when comparing its historical volatility, Stepstone Group is 1.67 times less risky than Pactiv Evergreen. The stock trades about -0.17 of its potential returns per unit of risk. The Pactiv Evergreen is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Pactiv Evergreen on September 28, 2024 and sell it today you would earn a total of  400.00  from holding Pactiv Evergreen or generate 29.85% return on investment over 90 days.

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

Stepstone Group  vs.  Pactiv Evergreen

Stepstone Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pactiv Evergreen

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pactiv Evergreen are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pactiv Evergreen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepstone and Pactiv Evergreen

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

The idea behind Stepstone Group and Pactiv Evergreen 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.