Correlation Between Futuretech and Stepstone

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

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

Diversification Opportunities for Futuretech and Stepstone

-0.38

Correlation Coefficient

Futuretech  Stepstone

Very good diversification

The 3 months correlation between Futuretech and Stepstone is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Futuretech II Acquisition and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Futuretech 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 Futuretech II Acquisition 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 Futuretech i.e., Futuretech and Stepstone go up and down completely randomly.

Pair Corralation between Futuretech and Stepstone

Given the investment horizon of 90 days Futuretech is expected to generate 6.17 times less return on investment than Stepstone. But when comparing it to its historical volatility, Futuretech II Acquisition is 2.66 times less risky than Stepstone. It trades about 0.04 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,831  in Stepstone Group on October 26, 2024 and sell it today you would earn a total of  3,610  from holding Stepstone Group or generate 127.52% return on investment over 90 days.

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

Futuretech II Acquisition  vs.  Stepstone Group

Futuretech II Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Futuretech II Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Futuretech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stepstone Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Futuretech and Stepstone

The main advantage of trading using opposite Futuretech and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Futuretech 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 Futuretech II Acquisition 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.