Correlation Between Steel Connect and Stagwell

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

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

Diversification Opportunities for Steel Connect and Stagwell

0.1

Correlation Coefficient

Steel Connect  Stagwell

Average diversification

The 3 months correlation between Steel and Stagwell is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Steel Connect and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell and Steel Connect 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 Steel Connect are associated (or correlated) with Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of Steel Connect i.e., Steel Connect and Stagwell go up and down completely randomly.

Pair Corralation between Steel Connect and Stagwell

Given the investment horizon of 90 days Steel Connect is expected to generate 1.8 times less return on investment than Stagwell. But when comparing it to its historical volatility, Steel Connect is 1.08 times less risky than Stagwell. It trades about 0.03 of its potential returns per unit of risk. Stagwell is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Stagwell on October 5, 2024 and sell it today you would earn a total of  200.00  from holding Stagwell or generate 44.44% return on investment over 90 days.

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

Steel Connect  vs.  Stagwell

Steel Connect

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steel Connect are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Steel Connect displayed solid returns over the last few months and may actually be approaching a breakup point.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Steel Connect and Stagwell

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

The idea behind Steel Connect and Stagwell 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.