Correlation Between Stepan and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Stepan and Centessa Pharmaceuticals

-0.04

Correlation Coefficient

Stepan  Centessa Pharmaceuticals

Good diversification

The 3 months correlation between Stepan and Centessa is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals 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 Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Stepan i.e., Stepan and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Stepan and Centessa Pharmaceuticals

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Centessa Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.0 times less risky than Centessa Pharmaceuticals. The stock trades about -0.08 of its potential returns per unit of risk. The Centessa Pharmaceuticals PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  880.00  in Centessa Pharmaceuticals PLC on September 29, 2024 and sell it today you would earn a total of  815.00  from holding Centessa Pharmaceuticals PLC or generate 92.61% 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.  Centessa Pharmaceuticals PLC

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 unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Centessa Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stepan and Centessa Pharmaceuticals

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

The idea behind Stepan Company and Centessa Pharmaceuticals PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.