Correlation Between Stellar and SWK Holdings

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

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

Diversification Opportunities for Stellar and SWK Holdings

0.33

Correlation Coefficient

Stellar  SWK Holdings

Weak diversification

The 3 months correlation between Stellar and SWK is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SWK Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings has no effect on the direction of Stellar i.e., Stellar and SWK Holdings go up and down completely randomly.

Pair Corralation between Stellar and SWK Holdings

Assuming the 90 days trading horizon Stellar is expected to under-perform the SWK Holdings. In addition to that, Stellar is 18.73 times more volatile than SWK Holdings. It trades about -0.02 of its total potential returns per unit of risk. SWK Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,473  in SWK Holdings on December 20, 2024 and sell it today you would earn a total of  27.00  from holding SWK Holdings or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Stellar  vs.  SWK Holdings

Stellar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stellar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Stellar shareholders.

SWK Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, SWK Holdings is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Stellar and SWK Holdings

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

The idea behind Stellar and SWK Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.