Correlation Between Ihuman and Stepan

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

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

Diversification Opportunities for Ihuman and Stepan

0.04

Correlation Coefficient

Ihuman  Stepan

Significant diversification

The 3 months correlation between Ihuman and Stepan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ihuman Inc and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Ihuman 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 Ihuman Inc 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 Ihuman i.e., Ihuman and Stepan go up and down completely randomly.

Pair Corralation between Ihuman and Stepan

Allowing for the 90-day total investment horizon Ihuman Inc is expected to generate 2.26 times more return on investment than Stepan. However, Ihuman is 2.26 times more volatile than Stepan Company. It trades about 0.08 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest  157.00  in Ihuman Inc on September 18, 2024 and sell it today you would earn a total of  24.00  from holding Ihuman Inc or generate 15.29% return on investment over 90 days.

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

Ihuman Inc  vs.  Stepan Company

Ihuman Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ihuman Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, Ihuman demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 Ihuman and Stepan

The main advantage of trading using opposite Ihuman and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ihuman 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 Ihuman Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.