Correlation Between Minerals Technologies and Stepan

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

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

Diversification Opportunities for Minerals Technologies and Stepan

0.87

Correlation Coefficient

Minerals Technologies  Stepan

Very poor diversification

The 3 months correlation between Minerals and Stepan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Minerals 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 Minerals 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 Minerals Technologies i.e., Minerals Technologies and Stepan go up and down completely randomly.

Pair Corralation between Minerals Technologies and Stepan

Considering the 90-day investment horizon Minerals Technologies is expected to under-perform the Stepan. But the stock apears to be less risky and, when comparing its historical volatility, Minerals Technologies is 1.38 times less risky than Stepan. The stock trades about -0.19 of its potential returns per unit of risk. The Stepan Company is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  6,421  in Stepan Company on December 29, 2024 and sell it today you would lose (700.00) from holding Stepan Company or give up 10.9% of portfolio value over 90 days.

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

Minerals Technologies  vs.  Stepan Company

Minerals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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 unsteady 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 Minerals Technologies and Stepan

The main advantage of trading using opposite Minerals Technologies and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minerals 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 Minerals 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.