Correlation Between Rand Capital and Stellus Capital

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

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

Diversification Opportunities for Rand Capital and Stellus Capital

0.8

Correlation Coefficient

Rand Capital  Stellus Capital

Very poor diversification

The 3 months correlation between Rand and Stellus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve and Rand Capital 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 Rand Capital Corp are associated (or correlated) with Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of Rand Capital i.e., Rand Capital and Stellus Capital go up and down completely randomly.

Pair Corralation between Rand Capital and Stellus Capital

Given the investment horizon of 90 days Rand Capital Corp is expected to generate 3.46 times more return on investment than Stellus Capital. However, Rand Capital is 3.46 times more volatile than Stellus Capital Investment. It trades about 0.04 of its potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.1 per unit of risk. If you would invest  1,793  in Rand Capital Corp on December 27, 2024 and sell it today you would earn a total of  107.00  from holding Rand Capital Corp or generate 5.97% return on investment over 90 days.

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

Rand Capital Corp  vs.  Stellus Capital Investment

Rand Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rand Capital Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Rand Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Stellus Capital Inve

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rand Capital and Stellus Capital

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

The idea behind Rand Capital Corp and Stellus Capital Investment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.