Correlation Between Stepan and Mid Atlantic

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

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

Diversification Opportunities for Stepan and Mid Atlantic

0.0

Correlation Coefficient

Stepan  Mid Atlantic

Pay attention - limited upside

The 3 months correlation between Stepan and Mid is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Mid Atlantic Home Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Atlantic Home 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 Mid Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Atlantic Home has no effect on the direction of Stepan i.e., Stepan and Mid Atlantic go up and down completely randomly.

Pair Corralation between Stepan and Mid Atlantic

If you would invest  0.01  in Mid Atlantic Home Health on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Mid Atlantic Home Health or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Stepan Company  vs.  Mid Atlantic Home Health

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.

Mid Atlantic Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Atlantic Home Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Mid Atlantic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stepan and Mid Atlantic

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

The idea behind Stepan Company and Mid Atlantic Home Health 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.