Correlation Between Stoneridge and Standard

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

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

Diversification Opportunities for Stoneridge and Standard

0.63

Correlation Coefficient

Stoneridge  Standard

Poor diversification

The 3 months correlation between Stoneridge and Standard is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Stoneridge and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products and Stoneridge 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 Stoneridge are associated (or correlated) with Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Stoneridge i.e., Stoneridge and Standard go up and down completely randomly.

Pair Corralation between Stoneridge and Standard

Considering the 90-day investment horizon Stoneridge is expected to under-perform the Standard. In addition to that, Stoneridge is 1.62 times more volatile than Standard Motor Products. It trades about -0.07 of its total potential returns per unit of risk. Standard Motor Products is currently generating about 0.1 per unit of volatility. If you would invest  3,057  in Standard Motor Products on February 5, 2024 and sell it today you would earn a total of  178.00  from holding Standard Motor Products or generate 5.82% return on investment over 90 days.

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

Stoneridge  vs.  Standard Motor Products

Stoneridge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoneridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Standard Motor Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Motor Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Stoneridge and Standard

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

The idea behind Stoneridge and Standard Motor Products 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.