Correlation Between Stepstone and Delek Logistics

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

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

Diversification Opportunities for Stepstone and Delek Logistics

-0.39

Correlation Coefficient

Stepstone  Delek Logistics

Very good diversification

The 3 months correlation between Stepstone and Delek is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Delek Logistics Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Logistics Partners 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 Delek Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Logistics Partners has no effect on the direction of Stepstone i.e., Stepstone and Delek Logistics go up and down completely randomly.

Pair Corralation between Stepstone and Delek Logistics

Given the investment horizon of 90 days Stepstone Group is expected to generate 3.99 times more return on investment than Delek Logistics. However, Stepstone is 3.99 times more volatile than Delek Logistics Partners. It trades about 0.19 of its potential returns per unit of risk. Delek Logistics Partners is currently generating about 0.4 per unit of risk. If you would invest  5,900  in Stepstone Group on September 2, 2024 and sell it today you would earn a total of  689.00  from holding Stepstone Group or generate 11.68% return on investment over 90 days.

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

Stepstone Group  vs.  Delek Logistics Partners

Stepstone Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Stepstone and Delek Logistics

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

The idea behind Stepstone Group and Delek Logistics Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.