Correlation Between Paysafe and Stepan

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

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

Diversification Opportunities for Paysafe and Stepan

0.41

Correlation Coefficient

Paysafe  Stepan

Very weak diversification

The 3 months correlation between Paysafe and Stepan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Paysafe and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Paysafe 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 Paysafe 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 Paysafe i.e., Paysafe and Stepan go up and down completely randomly.

Pair Corralation between Paysafe and Stepan

Given the investment horizon of 90 days Paysafe is expected to generate 2.15 times more return on investment than Stepan. However, Paysafe is 2.15 times more volatile than Stepan Company. It trades about 0.03 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  1,442  in Paysafe on September 24, 2024 and sell it today you would earn a total of  286.00  from holding Paysafe or generate 19.83% return on investment over 90 days.

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

Paysafe  vs.  Stepan Company

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 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 Paysafe and Stepan

The main advantage of trading using opposite Paysafe and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paysafe 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 Paysafe 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.