Correlation Between Stepstone and Gentex

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

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

Diversification Opportunities for Stepstone and Gentex

0.42

Correlation Coefficient

Stepstone  Gentex

Very weak diversification

The 3 months correlation between Stepstone and Gentex is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Stepstone i.e., Stepstone and Gentex go up and down completely randomly.

Pair Corralation between Stepstone and Gentex

Given the investment horizon of 90 days Stepstone Group is expected to generate 1.64 times more return on investment than Gentex. However, Stepstone is 1.64 times more volatile than Gentex. It trades about 0.11 of its potential returns per unit of risk. Gentex is currently generating about -0.02 per unit of risk. If you would invest  2,991  in Stepstone Group on October 5, 2024 and sell it today you would earn a total of  3,043  from holding Stepstone Group or generate 101.74% return on investment over 90 days.

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

Stepstone Group  vs.  Gentex

Stepstone Group

Risk-Adjusted Performance

1 of 100

Very 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 current stock price agitation, may contribute to short-term losses for the retail investors.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepstone and Gentex

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

The idea behind Stepstone Group and Gentex 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..