Correlation Between National Vision and Stepan

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

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

Diversification Opportunities for National Vision and Stepan

0.32

Correlation Coefficient

National Vision  Stepan

Weak diversification

The 3 months correlation between National and Stepan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and National Vision 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 National Vision Holdings 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 National Vision i.e., National Vision and Stepan go up and down completely randomly.

Pair Corralation between National Vision and Stepan

Considering the 90-day investment horizon National Vision Holdings is expected to under-perform the Stepan. In addition to that, National Vision is 1.94 times more volatile than Stepan Company. It trades about -0.05 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of volatility. If you would invest  10,283  in Stepan Company on September 20, 2024 and sell it today you would lose (3,494) from holding Stepan Company or give up 33.98% of portfolio value over 90 days.

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

National Vision Holdings  vs.  Stepan Company

National Vision Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, National Vision is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with National Vision and Stepan

The main advantage of trading using opposite National Vision and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Vision 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 National Vision Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.