Correlation Between Now Corp and Stemsation International

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

By analyzing existing cross correlation between Now Corp and Stemsation International, you can compare the effects of market volatilities on Now Corp and Stemsation International 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 Stemsation International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now Corp and Stemsation International.

Diversification Opportunities for Now Corp and Stemsation International

-0.06

Correlation Coefficient

Now Corp  Stemsation International

Good diversification

The 3 months correlation between Now and Stemsation is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Now Corp and Stemsation International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stemsation International 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 Stemsation International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stemsation International has no effect on the direction of Now Corp i.e., Now Corp and Stemsation International go up and down completely randomly.

Pair Corralation between Now Corp and Stemsation International

Given the investment horizon of 90 days Now Corp is expected to generate 6.34 times more return on investment than Stemsation International. However, Now Corp is 6.34 times more volatile than Stemsation International. It trades about 0.15 of its potential returns per unit of risk. Stemsation International is currently generating about -0.01 per unit of risk. If you would invest  0.01  in Now Corp on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Now Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Now Corp  vs.  Stemsation International

Now Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Now Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Now Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Stemsation International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stemsation International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Now Corp and Stemsation International

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

The idea behind Now Corp and Stemsation International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.