Correlation Between Stem and Uipath

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

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

Diversification Opportunities for Stem and Uipath

0.14

Correlation Coefficient

Stem  Uipath

Average diversification

The 3 months correlation between Stem and Uipath is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Uipath Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uipath Inc 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 Uipath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uipath Inc has no effect on the direction of Stem i.e., Stem and Uipath go up and down completely randomly.

Pair Corralation between Stem and Uipath

Given the investment horizon of 90 days Stem Inc is expected to generate 3.82 times more return on investment than Uipath. However, Stem is 3.82 times more volatile than Uipath Inc. It trades about 0.09 of its potential returns per unit of risk. Uipath Inc is currently generating about -0.06 per unit of risk. If you would invest  33.00  in Stem Inc on December 19, 2024 and sell it today you would earn a total of  7.50  from holding Stem Inc or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Stem Inc  vs.  Uipath Inc

Stem Inc

Risk-Adjusted Performance

Modest

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

Uipath Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Uipath Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Stem and Uipath

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

The idea behind Stem Inc and Uipath Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.