Correlation Between Stepan and Eastman Kodak

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

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

Diversification Opportunities for Stepan and Eastman Kodak

0.13

Correlation Coefficient

Stepan  Eastman Kodak

Average diversification

The 3 months correlation between Stepan and Eastman is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Eastman Kodak Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Kodak 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 Eastman Kodak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Kodak has no effect on the direction of Stepan i.e., Stepan and Eastman Kodak go up and down completely randomly.

Pair Corralation between Stepan and Eastman Kodak

Considering the 90-day investment horizon Stepan Company is expected to generate 0.69 times more return on investment than Eastman Kodak. However, Stepan Company is 1.44 times less risky than Eastman Kodak. It trades about -0.11 of its potential returns per unit of risk. Eastman Kodak Co is currently generating about -0.22 per unit of risk. If you would invest  6,214  in Stepan Company on December 21, 2024 and sell it today you would lose (326.00) from holding Stepan Company or give up 5.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Stepan Company  vs.  Eastman Kodak Co

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.

Eastman Kodak

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Stepan and Eastman Kodak

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

The idea behind Stepan Company and Eastman Kodak Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.