Correlation Between Hudson Technologies and Stepan

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

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

Diversification Opportunities for Hudson Technologies and Stepan

-0.28

Correlation Coefficient

Hudson Technologies  Stepan

Very good diversification

The 3 months correlation between Hudson and Stepan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Hudson Technologies 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 Hudson Technologies 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 Hudson Technologies i.e., Hudson Technologies and Stepan go up and down completely randomly.

Pair Corralation between Hudson Technologies and Stepan

Given the investment horizon of 90 days Hudson Technologies is expected to under-perform the Stepan. In addition to that, Hudson Technologies is 1.68 times more volatile than Stepan Company. It trades about -0.02 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of volatility. If you would invest  10,213  in Stepan Company on September 18, 2024 and sell it today you would lose (2,982) from holding Stepan Company or give up 29.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Hudson Technologies  vs.  Stepan Company

Hudson Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hudson Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 Hudson Technologies and Stepan

The main advantage of trading using opposite Hudson Technologies and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Technologies 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 Hudson Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.