Correlation Between Stepan and N2OFF

Can any of the company-specific risk be diversified away by investing in both Stepan and N2OFF 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 N2OFF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepan Company and N2OFF Inc, you can compare the effects of market volatilities on Stepan and N2OFF 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 N2OFF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and N2OFF.

Diversification Opportunities for Stepan and N2OFF

-0.28

Correlation Coefficient

Stepan  N2OFF

Very good diversification

The 3 months correlation between Stepan and N2OFF is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and N2OFF Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N2OFF Inc 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 N2OFF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N2OFF Inc has no effect on the direction of Stepan i.e., Stepan and N2OFF go up and down completely randomly.

Pair Corralation between Stepan and N2OFF

Considering the 90-day investment horizon Stepan Company is expected to generate 0.26 times more return on investment than N2OFF. However, Stepan Company is 3.83 times less risky than N2OFF. It trades about -0.04 of its potential returns per unit of risk. N2OFF Inc is currently generating about -0.08 per unit of risk. If you would invest  8,331  in Stepan Company on September 14, 2024 and sell it today you would lose (975.00) from holding Stepan Company or give up 11.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Stepan Company  vs.  N2OFF Inc

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 quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

N2OFF Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days N2OFF Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Stepan and N2OFF

The main advantage of trading using opposite Stepan and N2OFF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, N2OFF 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 N2OFF will offset losses from the drop in N2OFF's long position.

The idea behind Stepan Company and N2OFF Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.