Correlation Between Stepan and Delek Logistics

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

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

Diversification Opportunities for Stepan and Delek Logistics

-0.37

Correlation Coefficient

Stepan  Delek Logistics

Very good diversification

The 3 months correlation between Stepan and Delek is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Delek Logistics Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Logistics Partners 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 Delek Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Logistics Partners has no effect on the direction of Stepan i.e., Stepan and Delek Logistics go up and down completely randomly.

Pair Corralation between Stepan and Delek Logistics

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Delek Logistics. In addition to that, Stepan is 1.31 times more volatile than Delek Logistics Partners. It trades about -0.1 of its total potential returns per unit of risk. Delek Logistics Partners is currently generating about 0.12 per unit of volatility. If you would invest  3,995  in Delek Logistics Partners on December 27, 2024 and sell it today you would earn a total of  390.00  from holding Delek Logistics Partners or generate 9.76% 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.  Delek Logistics Partners

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 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.

Delek Logistics Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Logistics Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Delek Logistics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stepan and Delek Logistics

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

The idea behind Stepan Company and Delek Logistics Partners 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.