Correlation Between Stem Holdings and MPX International

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

By analyzing existing cross correlation between Stem Holdings and MPX International Corp, you can compare the effects of market volatilities on Stem Holdings and MPX International 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 Stem Holdings with a short position of MPX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem Holdings and MPX International.

Diversification Opportunities for Stem Holdings and MPX International

-0.01

Correlation Coefficient

Stem Holdings  MPX International

Good diversification

The 3 months correlation between Stem and MPX is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stem Holdings and MPX International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPX International Corp and Stem Holdings 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 Stem Holdings are associated (or correlated) with MPX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPX International Corp has no effect on the direction of Stem Holdings i.e., Stem Holdings and MPX International go up and down completely randomly.

Pair Corralation between Stem Holdings and MPX International

Given the investment horizon of 90 days Stem Holdings is expected to under-perform the MPX International. But the otc stock apears to be less risky and, when comparing its historical volatility, Stem Holdings is 4.75 times less risky than MPX International. The otc stock trades about -0.24 of its potential returns per unit of risk. The MPX International Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.11  in MPX International Corp on October 23, 2024 and sell it today you would lose (0.10) from holding MPX International Corp or give up 90.91% of portfolio value over 90 days.

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

Stem Holdings  vs.  MPX International Corp

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

MPX International Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MPX International Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MPX International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stem Holdings and MPX International

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

The idea behind Stem Holdings and MPX International Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.