Correlation Between 51Talk Online and Stepan

Can any of the company-specific risk be diversified away by investing in both 51Talk Online 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 51Talk Online and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 51Talk Online Education and Stepan Company, you can compare the effects of market volatilities on 51Talk Online 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 51Talk Online with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of 51Talk Online and Stepan.

Diversification Opportunities for 51Talk Online and Stepan

0.03

Correlation Coefficient

51Talk Online  Stepan

Significant diversification

The 3 months correlation between 51Talk and Stepan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding 51Talk Online Education and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and 51Talk Online 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 51Talk Online Education 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 51Talk Online i.e., 51Talk Online and Stepan go up and down completely randomly.

Pair Corralation between 51Talk Online and Stepan

Considering the 90-day investment horizon 51Talk Online Education is expected to generate 2.71 times more return on investment than Stepan. However, 51Talk Online is 2.71 times more volatile than Stepan Company. It trades about 0.14 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  662.00  in 51Talk Online Education on September 18, 2024 and sell it today you would earn a total of  1,013  from holding 51Talk Online Education or generate 153.02% return on investment over 90 days.

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

51Talk Online Education  vs.  Stepan Company

51Talk Online Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 51Talk Online Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, 51Talk Online may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 quite persistent fundamental indicators, Stepan 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 51Talk Online and Stepan

The main advantage of trading using opposite 51Talk Online and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 51Talk Online 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 51Talk Online Education 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.