Correlation Between Now Corp and STI Education

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

By analyzing existing cross correlation between Now Corp and STI Education Systems, you can compare the effects of market volatilities on Now Corp and STI Education 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 Now Corp with a short position of STI Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now Corp and STI Education.

Diversification Opportunities for Now Corp and STI Education

-0.36

Correlation Coefficient

Now Corp  STI Education

Very good diversification

The 3 months correlation between Now and STI is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Now Corp and STI Education Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STI Education Systems and Now Corp 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 Now Corp are associated (or correlated) with STI Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STI Education Systems has no effect on the direction of Now Corp i.e., Now Corp and STI Education go up and down completely randomly.

Pair Corralation between Now Corp and STI Education

Assuming the 90 days trading horizon Now Corp is expected to under-perform the STI Education. In addition to that, Now Corp is 1.27 times more volatile than STI Education Systems. It trades about -0.08 of its total potential returns per unit of risk. STI Education Systems is currently generating about 0.14 per unit of volatility. If you would invest  33.00  in STI Education Systems on October 5, 2024 and sell it today you would earn a total of  104.00  from holding STI Education Systems or generate 315.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.13%
Values	Daily Returns

Now Corp  vs.  STI Education Systems

Now Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

STI Education Systems

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days STI Education Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, STI Education may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Now Corp and STI Education

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

The idea behind Now Corp and STI Education Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.