Correlation Between Stewart Global and Steward Small

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

By analyzing existing cross correlation between Stewart Global Equity and Steward Small Mid Cap, you can compare the effects of market volatilities on Stewart Global and Steward Small 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 Stewart Global with a short position of Steward Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stewart Global and Steward Small.

Diversification Opportunities for Stewart Global and Steward Small

0.52

Correlation Coefficient

Stewart Global  Steward Small

Very weak diversification

The 3 months correlation between Stewart and Steward is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Global Equity and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid and Stewart Global 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 Stewart Global Equity are associated (or correlated) with Steward Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Stewart Global i.e., Stewart Global and Steward Small go up and down completely randomly.

Pair Corralation between Stewart Global and Steward Small

Assuming the 90 days horizon Stewart Global is expected to generate 4.69 times less return on investment than Steward Small. But when comparing it to its historical volatility, Stewart Global Equity is 1.57 times less risky than Steward Small. It trades about 0.04 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,333  in Steward Small Mid Cap on September 15, 2024 and sell it today you would earn a total of  102.00  from holding Steward Small Mid Cap or generate 7.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Stewart Global Equity  vs.  Steward Small Mid Cap

Stewart Global Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stewart Global Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stewart Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steward Small Mid

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stewart Global and Steward Small

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

The idea behind Stewart Global Equity and Steward Small Mid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.