Correlation Between Stepan and ClearOne

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

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

Diversification Opportunities for Stepan and ClearOne

-0.13

Correlation Coefficient

Stepan  ClearOne

Good diversification

The 3 months correlation between Stepan and ClearOne is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and ClearOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearOne 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 ClearOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearOne has no effect on the direction of Stepan i.e., Stepan and ClearOne go up and down completely randomly.

Pair Corralation between Stepan and ClearOne

Considering the 90-day investment horizon Stepan Company is expected to under-perform the ClearOne. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 1.96 times less risky than ClearOne. The stock trades about -0.07 of its potential returns per unit of risk. The ClearOne is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  60.00  in ClearOne on September 22, 2024 and sell it today you would earn a total of  1.00  from holding ClearOne or generate 1.67% return on investment over 90 days.

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

Stepan Company  vs.  ClearOne

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 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.

ClearOne

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ClearOne are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, ClearOne may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stepan and ClearOne

The main advantage of trading using opposite Stepan and ClearOne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, ClearOne 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 ClearOne will offset losses from the drop in ClearOne's long position.

The idea behind Stepan Company and ClearOne 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.