Correlation Between Altus Power and Stem

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

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

Diversification Opportunities for Altus Power and Stem

-0.19

Correlation Coefficient

Altus Power  Stem

Good diversification

The 3 months correlation between Altus and Stem is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Altus Power and Stem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Inc and Altus Power 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 Altus Power are associated (or correlated) with Stem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Inc has no effect on the direction of Altus Power i.e., Altus Power and Stem go up and down completely randomly.

Pair Corralation between Altus Power and Stem

Given the investment horizon of 90 days Altus Power is expected to generate 12.93 times less return on investment than Stem. But when comparing it to its historical volatility, Altus Power is 3.01 times less risky than Stem. It trades about 0.07 of its potential returns per unit of risk. Stem Inc is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Stem Inc on October 1, 2024 and sell it today you would earn a total of  36.56  from holding Stem Inc or generate 96.21% return on investment over 90 days.

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

Altus Power  vs.  Stem Inc

Altus Power

Risk-Adjusted Performance

8 of 100

OK

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

Stem Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Stem displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altus Power and Stem

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

The idea behind Altus Power and Stem 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 CEOs Directory module to screen CEOs from public companies around the world.