Correlation Between Steward Equity and Steward Small-mid

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

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

Diversification Opportunities for Steward Equity and Steward Small-mid

-0.84

Correlation Coefficient

Steward Equity  Steward Small-mid

Pay attention - limited upside

The 3 months correlation between Steward and Steward is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Steward Equity Market 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 Steward Equity 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 Steward Equity Market are associated (or correlated) with Steward Small-mid. 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 Steward Equity i.e., Steward Equity and Steward Small-mid go up and down completely randomly.

Pair Corralation between Steward Equity and Steward Small-mid

Assuming the 90 days horizon Steward Equity Market is expected to under-perform the Steward Small-mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Steward Equity Market is 2.37 times less risky than Steward Small-mid. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Steward Small Mid Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,287  in Steward Small Mid Cap on September 11, 2024 and sell it today you would earn a total of  164.00  from holding Steward Small Mid Cap or generate 12.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Steward Equity Market  vs.  Steward Small Mid Cap

Steward Equity Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steward Equity Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Steward Equity 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small-mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Steward Equity and Steward Small-mid

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

The idea behind Steward Equity Market 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.