Correlation Between Stepstone and Cactus Acquisition

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

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

Diversification Opportunities for Stepstone and Cactus Acquisition

-0.5

Correlation Coefficient

Stepstone  Cactus Acquisition

Very good diversification

The 3 months correlation between Stepstone and Cactus is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Cactus Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Acquisition 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 Cactus Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Acquisition Corp has no effect on the direction of Stepstone i.e., Stepstone and Cactus Acquisition go up and down completely randomly.

Pair Corralation between Stepstone and Cactus Acquisition

Given the investment horizon of 90 days Stepstone Group is expected to generate 0.84 times more return on investment than Cactus Acquisition. However, Stepstone Group is 1.18 times less risky than Cactus Acquisition. It trades about 0.11 of its potential returns per unit of risk. Cactus Acquisition Corp is currently generating about 0.01 per unit of risk. If you would invest  5,543  in Stepstone Group on September 18, 2024 and sell it today you would earn a total of  821.00  from holding Stepstone Group or generate 14.81% return on investment over 90 days.

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

Stepstone Group  vs.  Cactus Acquisition Corp

Stepstone Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Cactus Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cactus Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cactus Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Stepstone and Cactus Acquisition

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

The idea behind Stepstone Group and Cactus Acquisition 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.