Correlation Between Stepan and TOYO Co,

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

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

Diversification Opportunities for Stepan and TOYO Co,

0.08

Correlation Coefficient

Stepan  TOYO Co,

Significant diversification

The 3 months correlation between Stepan and TOYO is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and TOYO Co, Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOYO Co, 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 TOYO Co,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOYO Co, has no effect on the direction of Stepan i.e., Stepan and TOYO Co, go up and down completely randomly.

Pair Corralation between Stepan and TOYO Co,

Considering the 90-day investment horizon Stepan Company is expected to under-perform the TOYO Co,. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 13.36 times less risky than TOYO Co,. The stock trades about -0.25 of its potential returns per unit of risk. The TOYO Co, Ltd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  309.00  in TOYO Co, Ltd on September 20, 2024 and sell it today you would earn a total of  37.00  from holding TOYO Co, Ltd or generate 11.97% 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.  TOYO Co, 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 weak 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.

TOYO Co,

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Stepan and TOYO Co,

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

The idea behind Stepan Company and TOYO Co, 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.