Correlation Between Stepan and NH Foods

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

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

Diversification Opportunities for Stepan and NH Foods

0.0

Correlation Coefficient

Stepan  NH Foods

Pay attention - limited upside

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

Pair Corralation between Stepan and NH Foods

If you would invest  1,700  in NH Foods Ltd on September 25, 2024 and sell it today you would earn a total of  0.00  from holding NH Foods Ltd or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Stepan Company  vs.  NH Foods Ltd

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.

NH Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods 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 NH Foods

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

The idea behind Stepan Company and NH Foods Ltd 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.