Correlation Between CarsalesCom and Stepstone

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

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

Diversification Opportunities for CarsalesCom and Stepstone

0.14

Correlation Coefficient

CarsalesCom  Stepstone

Average diversification

The 3 months correlation between CarsalesCom and Stepstone is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and CarsalesCom 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 CarsalesCom Ltd ADR 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 CarsalesCom i.e., CarsalesCom and Stepstone go up and down completely randomly.

Pair Corralation between CarsalesCom and Stepstone

Assuming the 90 days horizon CarsalesCom Ltd ADR is expected to under-perform the Stepstone. In addition to that, CarsalesCom is 1.16 times more volatile than Stepstone Group. It trades about -0.01 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.02 per unit of volatility. If you would invest  5,975  in Stepstone Group on October 11, 2024 and sell it today you would earn a total of  94.00  from holding Stepstone Group or generate 1.57% return on investment over 90 days.

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

CarsalesCom Ltd ADR  vs.  Stepstone Group

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stepstone Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 CarsalesCom and Stepstone

The main advantage of trading using opposite CarsalesCom and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarsalesCom 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 CarsalesCom Ltd ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.