Correlation Between Federated Investors and Stepstone

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

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

Diversification Opportunities for Federated Investors and Stepstone

0.93

Correlation Coefficient

Federated Investors  Stepstone

Almost no diversification

The 3 months correlation between Federated and Stepstone is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Federated Investors B and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Federated Investors 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 Federated Investors B 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 Federated Investors i.e., Federated Investors and Stepstone go up and down completely randomly.

Pair Corralation between Federated Investors and Stepstone

Considering the 90-day investment horizon Federated Investors B is expected to generate 0.56 times more return on investment than Stepstone. However, Federated Investors B is 1.77 times less risky than Stepstone. It trades about 0.28 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.16 per unit of risk. If you would invest  3,454  in Federated Investors B on September 2, 2024 and sell it today you would earn a total of  821.00  from holding Federated Investors B or generate 23.77% return on investment over 90 days.

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

Federated Investors B  vs.  Stepstone Group

Federated Investors

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Investors B are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Federated Investors demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federated Investors and Stepstone

The main advantage of trading using opposite Federated Investors and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Investors 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 Federated Investors B 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.