Correlation Between Global Lights and Stepan

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

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

Diversification Opportunities for Global Lights and Stepan

-0.67

Correlation Coefficient

Global Lights  Stepan

Excellent diversification

The 3 months correlation between Global and Stepan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Global Lights Acquisition and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Global Lights 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 Global Lights Acquisition 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 Global Lights i.e., Global Lights and Stepan go up and down completely randomly.

Pair Corralation between Global Lights and Stepan

Assuming the 90 days horizon Global Lights Acquisition is expected to generate 0.09 times more return on investment than Stepan. However, Global Lights Acquisition is 10.82 times less risky than Stepan. It trades about 0.22 of its potential returns per unit of risk. Stepan Company is currently generating about -0.11 per unit of risk. If you would invest  1,075  in Global Lights Acquisition on December 22, 2024 and sell it today you would earn a total of  25.00  from holding Global Lights Acquisition or generate 2.33% return on investment over 90 days.

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

Global Lights Acquisition  vs.  Stepan Company

Global Lights Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Stepan Company

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Global Lights and Stepan

The main advantage of trading using opposite Global Lights and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Lights 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 Global Lights Acquisition 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.