Correlation Between Stepan and Shimmick Common

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

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

Diversification Opportunities for Stepan and Shimmick Common

0.01

Correlation Coefficient

Stepan  Shimmick Common

Significant diversification

The 3 months correlation between Stepan and Shimmick is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Shimmick Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimmick Common 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 Shimmick Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimmick Common has no effect on the direction of Stepan i.e., Stepan and Shimmick Common go up and down completely randomly.

Pair Corralation between Stepan and Shimmick Common

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Shimmick Common. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 4.62 times less risky than Shimmick Common. The stock trades about -0.46 of its potential returns per unit of risk. The Shimmick Common is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Shimmick Common on September 25, 2024 and sell it today you would earn a total of  82.00  from holding Shimmick Common or generate 38.5% return on investment over 90 days.

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

Stepan Company  vs.  Shimmick Common

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.

Shimmick Common

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shimmick Common are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Shimmick Common displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and Shimmick Common

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

The idea behind Stepan Company and Shimmick Common 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.