Correlation Between Cracker Barrel and Stepstone

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

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

Diversification Opportunities for Cracker Barrel and Stepstone

0.77

Correlation Coefficient

Cracker Barrel  Stepstone

Poor diversification

The 3 months correlation between Cracker and Stepstone is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Cracker Barrel 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 Cracker Barrel Old are associated (or correlated) with Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Cracker Barrel i.e., Cracker Barrel and Stepstone go up and down completely randomly.

Pair Corralation between Cracker Barrel and Stepstone

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the Stepstone. In addition to that, Cracker Barrel is 1.28 times more volatile than Stepstone Group. It trades about -0.14 of its total potential returns per unit of risk. Stepstone Group is currently generating about -0.03 per unit of volatility. If you would invest  5,963  in Stepstone Group on December 27, 2024 and sell it today you would lose (430.00) from holding Stepstone Group or give up 7.21% of portfolio value over 90 days.

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

Cracker Barrel Old  vs.  Stepstone Group

Cracker Barrel Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cracker Barrel Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cracker Barrel and Stepstone

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

The idea behind Cracker Barrel Old and Stepstone Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.