Correlation Between SentinelOne and Stem

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

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

Diversification Opportunities for SentinelOne and Stem

-0.5

Correlation Coefficient

SentinelOne  Stem

Very good diversification

The 3 months correlation between SentinelOne and Stem is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and Stem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Inc and SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and Stem go up and down completely randomly.

Pair Corralation between SentinelOne and Stem

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Stem. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 4.97 times less risky than Stem. The stock trades about -0.06 of its potential returns per unit of risk. The Stem Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Stem Inc on October 25, 2024 and sell it today you would earn a total of  11.00  from holding Stem Inc or generate 20.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SentinelOne  vs.  Stem Inc

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Stem Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Stem displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SentinelOne and Stem

The main advantage of trading using opposite SentinelOne and Stem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 SentinelOne 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.