Correlation Between Stellar and FT Vest

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

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

Diversification Opportunities for Stellar and FT Vest

0.52

Correlation Coefficient

Stellar  FT Vest

Very weak diversification

The 3 months correlation between Stellar and SDVD is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and FT Vest SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest SMID 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest SMID has no effect on the direction of Stellar i.e., Stellar and FT Vest go up and down completely randomly.

Pair Corralation between Stellar and FT Vest

Assuming the 90 days trading horizon Stellar is expected to generate 7.09 times more return on investment than FT Vest. However, Stellar is 7.09 times more volatile than FT Vest SMID. It trades about 0.14 of its potential returns per unit of risk. FT Vest SMID is currently generating about 0.06 per unit of risk. If you would invest  11.00  in Stellar on October 9, 2024 and sell it today you would earn a total of  31.00  from holding Stellar or generate 281.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.4%
Values	Daily Returns

Stellar  vs.  FT Vest SMID

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.

FT Vest SMID

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FT Vest SMID has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FT Vest is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stellar and FT Vest

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

The idea behind Stellar and FT Vest SMID 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.