Correlation Between Steven Madden and Stepstone

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

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

Diversification Opportunities for Steven Madden and Stepstone

-0.14

Correlation Coefficient

Steven Madden  Stepstone

Good diversification

The 3 months correlation between Steven and Stepstone is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Steven Madden 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 Steven Madden 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 Steven Madden i.e., Steven Madden and Stepstone go up and down completely randomly.

Pair Corralation between Steven Madden and Stepstone

Given the investment horizon of 90 days Steven Madden is expected to generate 5.73 times less return on investment than Stepstone. But when comparing it to its historical volatility, Steven Madden is 1.23 times less risky than Stepstone. It trades about 0.03 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,379  in Stepstone Group on September 2, 2024 and sell it today you would earn a total of  1,210  from holding Stepstone Group or generate 22.49% return on investment over 90 days.

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

Steven Madden  vs.  Stepstone Group

Steven Madden

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steven Madden are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steven Madden and Stepstone

The main advantage of trading using opposite Steven Madden and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden 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 Steven Madden 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.