Correlation Between Saratoga Investment and Stepstone

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

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

Diversification Opportunities for Saratoga Investment and Stepstone

0.63

Correlation Coefficient

Saratoga Investment  Stepstone

Poor diversification

The 3 months correlation between Saratoga and Stepstone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Saratoga Investment Corp and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Saratoga Investment 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 Saratoga Investment Corp are associated (or correlated) with Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Saratoga Investment i.e., Saratoga Investment and Stepstone go up and down completely randomly.

Pair Corralation between Saratoga Investment and Stepstone

Considering the 90-day investment horizon Saratoga Investment Corp is expected to generate 0.36 times more return on investment than Stepstone. However, Saratoga Investment Corp is 2.76 times less risky than Stepstone. It trades about 0.17 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.02 per unit of risk. If you would invest  2,263  in Saratoga Investment Corp on October 6, 2024 and sell it today you would earn a total of  169.00  from holding Saratoga Investment Corp or generate 7.47% return on investment over 90 days.

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

Saratoga Investment Corp  vs.  Stepstone Group

Saratoga Investment Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investment Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Saratoga Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stepstone Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Saratoga Investment and Stepstone

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

The idea behind Saratoga Investment Corp and Stepstone Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.