Correlation Between Stellar and Patterson Companies

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

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

Diversification Opportunities for Stellar and Patterson Companies

0.44

Correlation Coefficient

Stellar  Patterson Companies

Very weak diversification

The 3 months correlation between Stellar and Patterson is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies and Stellar 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 Stellar are associated (or correlated) with Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Stellar i.e., Stellar and Patterson Companies go up and down completely randomly.

Pair Corralation between Stellar and Patterson Companies

Assuming the 90 days trading horizon Stellar is expected to generate 3.0 times more return on investment than Patterson Companies. However, Stellar is 3.0 times more volatile than Patterson Companies. It trades about 0.1 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.03 per unit of risk. If you would invest  9.48  in Stellar on October 10, 2024 and sell it today you would earn a total of  32.52  from holding Stellar or generate 343.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.32%
Values	Daily Returns

Stellar  vs.  Patterson Companies

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Patterson Companies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Patterson Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and Patterson Companies

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

The idea behind Stellar and Patterson Companies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.