Correlation Between Step One and Energy Technologies

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

By analyzing existing cross correlation between Step One Clothing and Energy Technologies Limited, you can compare the effects of market volatilities on Step One and Energy 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 Step One with a short position of Energy Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Step One and Energy Technologies.

Diversification Opportunities for Step One and Energy Technologies

0.72

Correlation Coefficient

Step One  Energy Technologies

Poor diversification

The 3 months correlation between Step and Energy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Step One Clothing and Energy Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Technologies and Step One 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 Step One Clothing are associated (or correlated) with Energy Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Technologies has no effect on the direction of Step One i.e., Step One and Energy Technologies go up and down completely randomly.

Pair Corralation between Step One and Energy Technologies

Assuming the 90 days trading horizon Step One Clothing is expected to generate 1.55 times more return on investment than Energy Technologies. However, Step One is 1.55 times more volatile than Energy Technologies Limited. It trades about 0.0 of its potential returns per unit of risk. Energy Technologies Limited is currently generating about -0.03 per unit of risk. If you would invest  135.00  in Step One Clothing on September 26, 2024 and sell it today you would lose (11.00) from holding Step One Clothing or give up 8.15% of portfolio value over 90 days.

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

Step One Clothing  vs.  Energy Technologies Limited

Step One Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Step One Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Energy Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Step One and Energy Technologies

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

The idea behind Step One Clothing and Energy Technologies Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.