Correlation Between Siri Prime and STPI Public

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

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

Diversification Opportunities for Siri Prime and STPI Public

0.51

Correlation Coefficient

Siri Prime  STPI Public

Very weak diversification

The 3 months correlation between Siri and STPI is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Siri Prime Office and STPI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STPI Public and Siri Prime 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 Siri Prime Office are associated (or correlated) with STPI Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STPI Public has no effect on the direction of Siri Prime i.e., Siri Prime and STPI Public go up and down completely randomly.

Pair Corralation between Siri Prime and STPI Public

Assuming the 90 days trading horizon Siri Prime is expected to generate 109.46 times less return on investment than STPI Public. But when comparing it to its historical volatility, Siri Prime Office is 50.6 times less risky than STPI Public. It trades about 0.03 of its potential returns per unit of risk. STPI Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  326.00  in STPI Public on September 3, 2024 and sell it today you would earn a total of  18.00  from holding STPI Public or generate 5.52% return on investment over 90 days.

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

Siri Prime Office  vs.  STPI Public

Siri Prime Office

Risk-Adjusted Performance

4 of 100

Insignificant

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

STPI Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STPI Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, STPI Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siri Prime and STPI Public

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

The idea behind Siri Prime Office and STPI Public 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.

Check out your portfolio center.

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.