Correlation Between Stepan and Jutal Offshore

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

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

Diversification Opportunities for Stepan and Jutal Offshore

0.37

Correlation Coefficient

Stepan  Jutal Offshore

Weak diversification

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

Pair Corralation between Stepan and Jutal Offshore

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Jutal Offshore. In addition to that, Stepan is 24.13 times more volatile than Jutal Offshore Oil. It trades about -0.5 of its total potential returns per unit of risk. Jutal Offshore Oil is currently generating about -0.22 per unit of volatility. If you would invest  1,910  in Jutal Offshore Oil on September 24, 2024 and sell it today you would lose (5.00) from holding Jutal Offshore Oil or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Stepan Company  vs.  Jutal Offshore Oil

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 unsteady 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.

Jutal Offshore Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jutal Offshore Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Jutal Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and Jutal Offshore

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

The idea behind Stepan Company and Jutal Offshore Oil 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.