Correlation Between Stepan and EMBARQ

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

By analyzing existing cross correlation between Stepan Company and EMBARQ P 7995, you can compare the effects of market volatilities on Stepan and EMBARQ 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 EMBARQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and EMBARQ.

Diversification Opportunities for Stepan and EMBARQ

-0.29

Correlation Coefficient

Stepan  EMBARQ

Very good diversification

The 3 months correlation between Stepan and EMBARQ is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and EMBARQ P 7995 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARQ P 7995 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 EMBARQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARQ P 7995 has no effect on the direction of Stepan i.e., Stepan and EMBARQ go up and down completely randomly.

Pair Corralation between Stepan and EMBARQ

Considering the 90-day investment horizon Stepan Company is expected to under-perform the EMBARQ. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 3.97 times less risky than EMBARQ. The stock trades about -0.05 of its potential returns per unit of risk. The EMBARQ P 7995 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,925  in EMBARQ P 7995 on October 23, 2024 and sell it today you would lose (2,175) from holding EMBARQ P 7995 or give up 44.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Stepan Company  vs.  EMBARQ P 7995

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.

EMBARQ P 7995

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMBARQ P 7995 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for EMBARQ P 7995 investors.

Pair Trading with Stepan and EMBARQ

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

The idea behind Stepan Company and EMBARQ P 7995 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.