Correlation Between Stepstone and Portillos

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

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

Diversification Opportunities for Stepstone and Portillos

0.12

Correlation Coefficient

Stepstone  Portillos

Average diversification

The 3 months correlation between Stepstone and Portillos is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Portillos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portillos 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 Portillos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portillos has no effect on the direction of Stepstone i.e., Stepstone and Portillos go up and down completely randomly.

Pair Corralation between Stepstone and Portillos

Given the investment horizon of 90 days Stepstone Group is expected to under-perform the Portillos. But the stock apears to be less risky and, when comparing its historical volatility, Stepstone Group is 1.46 times less risky than Portillos. The stock trades about -0.05 of its potential returns per unit of risk. The Portillos is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  940.00  in Portillos on December 31, 2024 and sell it today you would earn a total of  250.00  from holding Portillos or generate 26.6% return on investment over 90 days.

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

Stepstone Group  vs.  Portillos

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.

Portillos

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Portillos are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Portillos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepstone and Portillos

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

The idea behind Stepstone Group and Portillos 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.