Correlation Between Stepstone and Magnite

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

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

Diversification Opportunities for Stepstone and Magnite

0.8

Correlation Coefficient

Stepstone  Magnite

Very poor diversification

The 3 months correlation between Stepstone and Magnite is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Magnite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnite 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 Magnite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnite has no effect on the direction of Stepstone i.e., Stepstone and Magnite go up and down completely randomly.

Pair Corralation between Stepstone and Magnite

Given the investment horizon of 90 days Stepstone Group is expected to generate 0.75 times more return on investment than Magnite. However, Stepstone Group is 1.33 times less risky than Magnite. It trades about -0.05 of its potential returns per unit of risk. Magnite is currently generating about -0.13 per unit of risk. If you would invest  5,833  in Stepstone Group on December 30, 2024 and sell it today you would lose (653.00) from holding Stepstone Group or give up 11.19% 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.  Magnite

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 latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Magnite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magnite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Stepstone and Magnite

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

The idea behind Stepstone Group and Magnite 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .