Correlation Between Stella Jones and Stantec

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

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

Diversification Opportunities for Stella Jones and Stantec

-0.74

Correlation Coefficient

Stella Jones  Stantec

Pay attention - limited upside

The 3 months correlation between Stella and Stantec is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Stantec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stantec and Stella Jones 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 Stella Jones are associated (or correlated) with Stantec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stantec has no effect on the direction of Stella Jones i.e., Stella Jones and Stantec go up and down completely randomly.

Pair Corralation between Stella Jones and Stantec

Assuming the 90 days horizon Stella Jones is expected to under-perform the Stantec. In addition to that, Stella Jones is 2.29 times more volatile than Stantec. It trades about -0.21 of its total potential returns per unit of risk. Stantec is currently generating about 0.2 per unit of volatility. If you would invest  11,403  in Stantec on August 31, 2024 and sell it today you would earn a total of  724.00  from holding Stantec or generate 6.35% return on investment over 90 days.

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

Stella Jones  vs.  Stantec

Stella Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stella Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Stantec

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stantec are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Stantec may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Stella Jones and Stantec

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

The idea behind Stella Jones and Stantec 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.