Correlation Between Stepan and Apogee Enterprises
Can any of the company-specific risk be diversified away by investing in both Stepan and Apogee Enterprises 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 Stepan and Apogee Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Apogee Enterprises, you can compare the effects of market volatilities on Stepan and Apogee Enterprises 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 Stepan with a short position of Apogee Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Apogee Enterprises.
Diversification Opportunities for Stepan and Apogee Enterprises
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stepan and Apogee is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Apogee Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apogee Enterprises and Stepan 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 Stepan Company are associated (or correlated) with Apogee Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apogee Enterprises has no effect on the direction of Stepan i.e., Stepan and Apogee Enterprises go up and down completely randomly.
Pair Corralation between Stepan and Apogee Enterprises
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Apogee Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.15 times less risky than Apogee Enterprises. The stock trades about -0.04 of its potential returns per unit of risk. The Apogee Enterprises is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,207 in Apogee Enterprises on September 26, 2024 and sell it today you would earn a total of 3,000 from holding Apogee Enterprises or generate 71.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Stepan Company vs. Apogee Enterprises
Performance |
Timeline |
Stepan Company |
Apogee Enterprises |
Stepan and Apogee Enterprises Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stepan and Apogee Enterprises
The main advantage of trading using opposite Stepan and Apogee Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Apogee Enterprises 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 Apogee Enterprises will offset losses from the drop in Apogee Enterprises' long position.The idea behind Stepan Company and Apogee Enterprises 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.Apogee Enterprises vs. Quanex Building Products | Apogee Enterprises vs. Janus International Group | Apogee Enterprises vs. Interface | Apogee Enterprises vs. Azek Company |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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