Correlation Between Stewart Information and Trade Desk

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

By analyzing existing cross correlation between Stewart Information Services and The Trade Desk, you can compare the effects of market volatilities on Stewart Information and Trade Desk 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 Information with a short position of Trade Desk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stewart Information and Trade Desk.

Diversification Opportunities for Stewart Information and Trade Desk

0.67

Correlation Coefficient

Stewart Information  Trade Desk

Poor diversification

The 3 months correlation between Stewart and Trade is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services and The Trade Desk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Desk and Stewart Information 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 Information Services are associated (or correlated) with Trade Desk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Desk has no effect on the direction of Stewart Information i.e., Stewart Information and Trade Desk go up and down completely randomly.

Pair Corralation between Stewart Information and Trade Desk

Assuming the 90 days horizon Stewart Information is expected to generate 1.26 times less return on investment than Trade Desk. But when comparing it to its historical volatility, Stewart Information Services is 1.36 times less risky than Trade Desk. It trades about 0.09 of its potential returns per unit of risk. The Trade Desk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,187  in The Trade Desk on October 5, 2024 and sell it today you would earn a total of  6,315  from holding The Trade Desk or generate 121.75% return on investment over 90 days.

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

Stewart Information Services  vs.  The Trade Desk

Stewart Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stewart Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stewart Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Trade Desk

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days The Trade Desk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating basic indicators, Trade Desk reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stewart Information and Trade Desk

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

The idea behind Stewart Information Services and The Trade Desk 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.