Correlation Between Aldel Financial and Stepan

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

By analyzing existing cross correlation between Aldel Financial II and Stepan Company, you can compare the effects of market volatilities on Aldel Financial and Stepan 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 Aldel Financial with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Stepan.

Diversification Opportunities for Aldel Financial and Stepan

0.34

Correlation Coefficient

Aldel Financial  Stepan

Weak diversification

The 3 months correlation between Aldel and Stepan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Aldel Financial i.e., Aldel Financial and Stepan go up and down completely randomly.

Pair Corralation between Aldel Financial and Stepan

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.07 times more return on investment than Stepan. However, Aldel Financial II is 14.8 times less risky than Stepan. It trades about 0.18 of its potential returns per unit of risk. Stepan Company is currently generating about -0.09 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Aldel Financial II or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	10.32%
Values	Daily Returns

Aldel Financial II  vs.  Stepan Company

Aldel Financial II

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aldel Financial and Stepan

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

The idea behind Aldel Financial II and Stepan Company 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.