Correlation Between Stoneridge and Superior Industries

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

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

Diversification Opportunities for Stoneridge and Superior Industries

-0.47

Correlation Coefficient

Stoneridge  Superior Industries

Very good diversification

The 3 months correlation between Stoneridge and Superior is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Stoneridge and Superior Industries Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Industries 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 Superior Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Industries has no effect on the direction of Stoneridge i.e., Stoneridge and Superior Industries go up and down completely randomly.

Pair Corralation between Stoneridge and Superior Industries

Considering the 90-day investment horizon Stoneridge is expected to generate 0.52 times more return on investment than Superior Industries. However, Stoneridge is 1.92 times less risky than Superior Industries. It trades about -0.05 of its potential returns per unit of risk. Superior Industries International is currently generating about -0.04 per unit of risk. If you would invest  1,653  in Stoneridge on February 11, 2024 and sell it today you would lose (49.00) from holding Stoneridge or give up 2.96% of portfolio value over 90 days.

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

Stoneridge  vs.  Superior Industries Internatio

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.

Superior Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Superior Industries International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Superior Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stoneridge and Superior Industries

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

The idea behind Stoneridge and Superior Industries International 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.