Correlation Between Under Armour and Stepstone

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

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

Diversification Opportunities for Under Armour and Stepstone

0.58

Correlation Coefficient

Under Armour  Stepstone

Very weak diversification

The 3 months correlation between Under and Stepstone is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group and Under Armour 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 Under Armour C are associated (or correlated) with Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Under Armour i.e., Under Armour and Stepstone go up and down completely randomly.

Pair Corralation between Under Armour and Stepstone

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Stepstone. In addition to that, Under Armour is 1.29 times more volatile than Stepstone Group. It trades about -0.01 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.08 per unit of volatility. If you would invest  2,673  in Stepstone Group on October 13, 2024 and sell it today you would earn a total of  3,117  from holding Stepstone Group or generate 116.61% return on investment over 90 days.

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

Under Armour C  vs.  Stepstone Group

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Stepstone Group

Risk-Adjusted Performance

0 of 100

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 relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Under Armour and Stepstone

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

The idea behind Under Armour C and Stepstone Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.