Correlation Between STL Technology and Connection Technology

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

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

Diversification Opportunities for STL Technology and Connection Technology

-0.82

Correlation Coefficient

STL Technology  Connection Technology

Pay attention - limited upside

The 3 months correlation between STL and Connection is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Connection Technology Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connection Technology and STL Technology 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 STL Technology Co are associated (or correlated) with Connection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connection Technology has no effect on the direction of STL Technology i.e., STL Technology and Connection Technology go up and down completely randomly.

Pair Corralation between STL Technology and Connection Technology

Assuming the 90 days trading horizon STL Technology Co is expected to generate 3.78 times more return on investment than Connection Technology. However, STL Technology is 3.78 times more volatile than Connection Technology Systems. It trades about -0.04 of its potential returns per unit of risk. Connection Technology Systems is currently generating about -0.15 per unit of risk. If you would invest  7,550  in STL Technology Co on October 27, 2024 and sell it today you would lose (340.00) from holding STL Technology Co or give up 4.5% of portfolio value over 90 days.

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

STL Technology Co  vs.  Connection Technology Systems

STL Technology

Risk-Adjusted Performance

18 of 100

Solid

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

Connection Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connection Technology Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with STL Technology and Connection Technology

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

The idea behind STL Technology Co and Connection Technology Systems 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.