Correlation Between Stepan and GEN Restaurant

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

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

Diversification Opportunities for Stepan and GEN Restaurant

0.41

Correlation Coefficient

Stepan  GEN Restaurant

Very weak diversification

The 3 months correlation between Stepan and GEN is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and GEN Restaurant Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEN Restaurant Group, 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 GEN Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEN Restaurant Group, has no effect on the direction of Stepan i.e., Stepan and GEN Restaurant go up and down completely randomly.

Pair Corralation between Stepan and GEN Restaurant

Considering the 90-day investment horizon Stepan Company is expected to under-perform the GEN Restaurant. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 28.65 times less risky than GEN Restaurant. The stock trades about -0.04 of its potential returns per unit of risk. The GEN Restaurant Group, is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in GEN Restaurant Group, on September 23, 2024 and sell it today you would earn a total of  753.00  from holding GEN Restaurant Group, or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.86%
Values	Daily Returns

Stepan Company  vs.  GEN Restaurant Group,

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.

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Stepan and GEN Restaurant

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

The idea behind Stepan Company and GEN Restaurant Group, 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .