Correlation Between Stem and Altus Power

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

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

Diversification Opportunities for Stem and Altus Power

-0.19

Correlation Coefficient

Stem  Altus Power

Good diversification

The 3 months correlation between Stem and Altus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power and Stem 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 Stem Inc are associated (or correlated) with Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of Stem i.e., Stem and Altus Power go up and down completely randomly.

Pair Corralation between Stem and Altus Power

Given the investment horizon of 90 days Stem Inc is expected to generate 1.85 times more return on investment than Altus Power. However, Stem is 1.85 times more volatile than Altus Power. It trades about -0.07 of its potential returns per unit of risk. Altus Power is currently generating about -0.18 per unit of risk. If you would invest  36.00  in Stem Inc on September 22, 2024 and sell it today you would lose (4.00) from holding Stem Inc or give up 11.11% of portfolio value over 90 days.

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

Stem Inc  vs.  Altus Power

Stem Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Stem displayed solid returns over the last few months and may actually be approaching a breakup point.

Altus Power

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Altus Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Altus Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stem and Altus Power

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

The idea behind Stem Inc and Altus Power 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.