Correlation Between Sapiens International and Stepstone

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

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

Diversification Opportunities for Sapiens International and Stepstone

-0.56

Correlation Coefficient

Sapiens International  Stepstone

Excellent diversification

The 3 months correlation between Sapiens and Stepstone is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sapiens International and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Sapiens International 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 Sapiens International 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 Sapiens International i.e., Sapiens International and Stepstone go up and down completely randomly.

Pair Corralation between Sapiens International and Stepstone

Given the investment horizon of 90 days Sapiens International is expected to under-perform the Stepstone. In addition to that, Sapiens International is 1.68 times more volatile than Stepstone Group. It trades about -0.07 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.12 per unit of volatility. If you would invest  5,444  in Stepstone Group on September 17, 2024 and sell it today you would earn a total of  919.50  from holding Stepstone Group or generate 16.89% return on investment over 90 days.

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

Sapiens International  vs.  Stepstone Group

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Stepstone Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sapiens International and Stepstone

The main advantage of trading using opposite Sapiens International and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sapiens International 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 Sapiens International 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.