Correlation Between Stepan and EON Resources

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

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

Diversification Opportunities for Stepan and EON Resources

0.38

Correlation Coefficient

Stepan  EON Resources

Weak diversification

The 3 months correlation between Stepan and EON is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources 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 EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Stepan i.e., Stepan and EON Resources go up and down completely randomly.

Pair Corralation between Stepan and EON Resources

Considering the 90-day investment horizon Stepan Company is expected to under-perform the EON Resources. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 8.63 times less risky than EON Resources. The stock trades about -0.77 of its potential returns per unit of risk. The EON Resources is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  71.00  in EON Resources on October 14, 2024 and sell it today you would earn a total of  21.00  from holding EON Resources or generate 29.58% 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.  EON Resources

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

EON Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Stepan and EON Resources

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

The idea behind Stepan Company and EON Resources 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.