Correlation Between Stone Ridge and Victory Global

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

By analyzing existing cross correlation between Stone Ridge Diversified and Victory Global Natural, you can compare the effects of market volatilities on Stone Ridge and Victory Global 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 Stone Ridge with a short position of Victory Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Victory Global.

Diversification Opportunities for Stone Ridge and Victory Global

0.47

Correlation Coefficient

Stone Ridge  Victory Global

Very weak diversification

The 3 months correlation between Stone and Victory is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Victory Global Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Global Natural and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Victory Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Global Natural has no effect on the direction of Stone Ridge i.e., Stone Ridge and Victory Global go up and down completely randomly.

Pair Corralation between Stone Ridge and Victory Global

Assuming the 90 days horizon Stone Ridge Diversified is expected to generate 0.1 times more return on investment than Victory Global. However, Stone Ridge Diversified is 9.75 times less risky than Victory Global. It trades about 0.5 of its potential returns per unit of risk. Victory Global Natural is currently generating about -0.21 per unit of risk. If you would invest  1,131  in Stone Ridge Diversified on September 19, 2024 and sell it today you would earn a total of  16.00  from holding Stone Ridge Diversified or generate 1.41% return on investment over 90 days.

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

Stone Ridge Diversified  vs.  Victory Global Natural

Stone Ridge Diversified

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Victory Global Natural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Global Natural are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Victory Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stone Ridge and Victory Global

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

The idea behind Stone Ridge Diversified and Victory Global Natural 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.