Correlation Between Stepstone and NetSol Technologies

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

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

Diversification Opportunities for Stepstone and NetSol Technologies

-0.05

Correlation Coefficient

Stepstone  NetSol Technologies

Good diversification

The 3 months correlation between Stepstone and NetSol is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Stepstone i.e., Stepstone and NetSol Technologies go up and down completely randomly.

Pair Corralation between Stepstone and NetSol Technologies

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the NetSol Technologies. In addition to that, Stepstone is 1.35 times more volatile than NetSol Technologies. It trades about -0.13 of its total potential returns per unit of risk. NetSol Technologies is currently generating about 0.29 per unit of volatility. If you would invest  260.00  in NetSol Technologies on September 17, 2024 and sell it today you would earn a total of  16.00  from holding NetSol Technologies or generate 6.15% 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.  NetSol Technologies

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.

NetSol Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, NetSol Technologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Stepstone and NetSol Technologies

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

The idea behind Stepstone Group and NetSol Technologies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.