Correlation Between Aeye and Stepan

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

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

Diversification Opportunities for Aeye and Stepan

0.42

Correlation Coefficient

Aeye  Stepan

Very weak diversification

The 3 months correlation between Aeye and Stepan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Aeye 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 Aeye 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 Aeye i.e., Aeye and Stepan go up and down completely randomly.

Pair Corralation between Aeye and Stepan

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the Stepan. In addition to that, Aeye is 6.05 times more volatile than Stepan Company. It trades about -0.11 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.1 per unit of volatility. If you would invest  6,485  in Stepan Company on December 27, 2024 and sell it today you would lose (756.00) from holding Stepan Company or give up 11.66% of portfolio value over 90 days.

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

Aeye Inc  vs.  Stepan Company

Aeye Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 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 Aeye and Stepan

The main advantage of trading using opposite Aeye and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeye 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 Aeye 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.