Correlation Between S Tech and Quanta Storage

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

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

Diversification Opportunities for S Tech and Quanta Storage

0.17

Correlation Coefficient

S Tech  Quanta Storage

Average diversification

The 3 months correlation between 1584 and Quanta is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding S Tech Corp and Quanta Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Storage and S Tech 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 S Tech Corp are associated (or correlated) with Quanta Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Storage has no effect on the direction of S Tech i.e., S Tech and Quanta Storage go up and down completely randomly.

Pair Corralation between S Tech and Quanta Storage

Assuming the 90 days trading horizon S Tech Corp is expected to generate 0.82 times more return on investment than Quanta Storage. However, S Tech Corp is 1.22 times less risky than Quanta Storage. It trades about 0.03 of its potential returns per unit of risk. Quanta Storage is currently generating about -0.03 per unit of risk. If you would invest  2,760  in S Tech Corp on December 23, 2024 and sell it today you would earn a total of  75.00  from holding S Tech Corp or generate 2.72% return on investment over 90 days.

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

S Tech Corp  vs.  Quanta Storage

S Tech Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in S Tech Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, S Tech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Quanta Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanta Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Quanta Storage is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with S Tech and Quanta Storage

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

The idea behind S Tech Corp and Quanta Storage 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.