Correlation Between INC Research and Stem Holdings

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

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

Diversification Opportunities for INC Research and Stem Holdings

-0.41

Correlation Coefficient

INC Research  Stem Holdings

Very good diversification

The 3 months correlation between INC and Stem is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and INC Research 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 INC Research Holdings are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of INC Research i.e., INC Research and Stem Holdings go up and down completely randomly.

Pair Corralation between INC Research and Stem Holdings

If you would invest  0.00  in Stem Holdings on December 26, 2024 and sell it today you would earn a total of  0.00  from holding Stem Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

INC Research Holdings  vs.  Stem Holdings

INC Research Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Stem Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stem Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Stem Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with INC Research and Stem Holdings

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

The idea behind INC Research Holdings and Stem Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.