Correlation Between Hub Cyber and Stem

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

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

Diversification Opportunities for Hub Cyber and Stem

-0.14

Correlation Coefficient

Hub Cyber  Stem

Good diversification

The 3 months correlation between Hub and Stem is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hub Cyber Security and Stem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Inc and Hub Cyber 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 Hub Cyber Security 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 Hub Cyber i.e., Hub Cyber and Stem go up and down completely randomly.

Pair Corralation between Hub Cyber and Stem

Assuming the 90 days horizon Hub Cyber Security is expected to generate 6.46 times more return on investment than Stem. However, Hub Cyber is 6.46 times more volatile than Stem Inc. It trades about 0.24 of its potential returns per unit of risk. Stem Inc is currently generating about 0.0 per unit of risk. If you would invest  0.45  in Hub Cyber Security on August 30, 2024 and sell it today you would earn a total of  1.56  from holding Hub Cyber Security or generate 346.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Hub Cyber Security  vs.  Stem Inc

Hub Cyber Security

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Cyber Security are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Hub Cyber showed solid returns over the last few months and may actually be approaching a breakup point.

Stem Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Stem is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hub Cyber and Stem

The main advantage of trading using opposite Hub Cyber and Stem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hub Cyber 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 Hub Cyber Security 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.

Check out your portfolio center.

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.