Correlation Between Stepan and Loop Media

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

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

Diversification Opportunities for Stepan and Loop Media

0.5

Correlation Coefficient

Stepan  Loop Media

Very weak diversification

The 3 months correlation between Stepan and Loop is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Loop Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Media 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 Loop Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Media has no effect on the direction of Stepan i.e., Stepan and Loop Media go up and down completely randomly.

Pair Corralation between Stepan and Loop Media

Considering the 90-day investment horizon Stepan Company is expected to generate 0.08 times more return on investment than Loop Media. However, Stepan Company is 12.28 times less risky than Loop Media. It trades about -0.13 of its potential returns per unit of risk. Loop Media is currently generating about -0.14 per unit of risk. If you would invest  8,915  in Stepan Company on September 28, 2024 and sell it today you would lose (2,207) from holding Stepan Company or give up 24.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	11.43%
Values	Daily Returns

Stepan Company  vs.  Loop Media

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Loop Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loop Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Loop Media is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Stepan and Loop Media

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

The idea behind Stepan Company and Loop Media 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.