Correlation Between Stepstone and Carlyle

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

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

Diversification Opportunities for Stepstone and Carlyle

0.83

Correlation Coefficient

Stepstone  Carlyle

Very poor diversification

The 3 months correlation between Stepstone and Carlyle is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group 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 Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Stepstone i.e., Stepstone and Carlyle go up and down completely randomly.

Pair Corralation between Stepstone and Carlyle

Given the investment horizon of 90 days Stepstone Group is expected to generate 1.06 times more return on investment than Carlyle. However, Stepstone is 1.06 times more volatile than Carlyle Group. It trades about -0.03 of its potential returns per unit of risk. Carlyle Group is currently generating about -0.07 per unit of risk. If you would invest  5,927  in Stepstone Group on December 21, 2024 and sell it today you would lose (407.00) from holding Stepstone Group or give up 6.87% of portfolio value over 90 days.

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

Stepstone Group  vs.  Carlyle Group

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Carlyle Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Stepstone and Carlyle

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

The idea behind Stepstone Group and Carlyle Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.