Correlation Between Stepan and QXO,

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

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

Diversification Opportunities for Stepan and QXO,

0.22

Correlation Coefficient

Stepan  QXO,

Modest diversification

The 3 months correlation between Stepan and QXO, is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and QXO, Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QXO, 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 QXO,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QXO, Inc has no effect on the direction of Stepan i.e., Stepan and QXO, go up and down completely randomly.

Pair Corralation between Stepan and QXO,

Considering the 90-day investment horizon Stepan Company is expected to under-perform the QXO,. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 6.08 times less risky than QXO,. The stock trades about -0.03 of its potential returns per unit of risk. The QXO, Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,471  in QXO, Inc on September 12, 2024 and sell it today you would lose (4,830) from holding QXO, Inc or give up 74.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Stepan Company  vs.  QXO, Inc

Stepan Company

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

QXO, Inc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in QXO, Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, QXO, may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stepan and QXO,

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

The idea behind Stepan Company and QXO, 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.