Correlation Between Stepstone and Ark Restaurants

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

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

Diversification Opportunities for Stepstone and Ark Restaurants

-0.49

Correlation Coefficient

Stepstone  Ark Restaurants

Very good diversification

The 3 months correlation between Stepstone and Ark is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Stepstone 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 Stepstone Group are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Stepstone i.e., Stepstone and Ark Restaurants go up and down completely randomly.

Pair Corralation between Stepstone and Ark Restaurants

Given the investment horizon of 90 days Stepstone Group is expected to generate 0.54 times more return on investment than Ark Restaurants. However, Stepstone Group is 1.84 times less risky than Ark Restaurants. It trades about 0.1 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about -0.02 per unit of risk. If you would invest  4,505  in Stepstone Group on September 24, 2024 and sell it today you would earn a total of  1,307  from holding Stepstone Group or generate 29.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.43%
Values	Daily Returns

Stepstone Group  vs.  Ark Restaurants Corp

Stepstone Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Ark Restaurants Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Ark Restaurants is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Stepstone and Ark Restaurants

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

The idea behind Stepstone Group and Ark Restaurants Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.