Correlation Between Stic Investments and Company K

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

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

Diversification Opportunities for Stic Investments and Company K

-0.13

Correlation Coefficient

Stic Investments  Company K

Good diversification

The 3 months correlation between Stic and Company is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stic Investments and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners and Stic Investments 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 Stic Investments are associated (or correlated) with Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of Stic Investments i.e., Stic Investments and Company K go up and down completely randomly.

Pair Corralation between Stic Investments and Company K

Assuming the 90 days trading horizon Stic Investments is expected to generate 0.58 times more return on investment than Company K. However, Stic Investments is 1.72 times less risky than Company K. It trades about -0.03 of its potential returns per unit of risk. Company K Partners is currently generating about -0.02 per unit of risk. If you would invest  963,000  in Stic Investments on October 4, 2024 and sell it today you would lose (100,000) from holding Stic Investments or give up 10.38% of portfolio value over 90 days.

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

Stic Investments  vs.  Company K Partners

Stic Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stic Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Stic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Company K Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Company K Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Company K is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stic Investments and Company K

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

The idea behind Stic Investments and Company K Partners 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.