Correlation Between Stepan and FREEPORT

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

By analyzing existing cross correlation between Stepan Company and FREEPORT MCMORAN INC 4375, you can compare the effects of market volatilities on Stepan and FREEPORT 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 FREEPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and FREEPORT.

Diversification Opportunities for Stepan and FREEPORT

0.02

Correlation Coefficient

Stepan  FREEPORT

Significant diversification

The 3 months correlation between Stepan and FREEPORT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and FREEPORT MCMORAN INC 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREEPORT MCMORAN 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 FREEPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREEPORT MCMORAN INC has no effect on the direction of Stepan i.e., Stepan and FREEPORT go up and down completely randomly.

Pair Corralation between Stepan and FREEPORT

Considering the 90-day investment horizon Stepan Company is expected to under-perform the FREEPORT. In addition to that, Stepan is 1.22 times more volatile than FREEPORT MCMORAN INC 4375. It trades about -0.67 of its total potential returns per unit of risk. FREEPORT MCMORAN INC 4375 is currently generating about -0.22 per unit of volatility. If you would invest  9,848  in FREEPORT MCMORAN INC 4375 on October 5, 2024 and sell it today you would lose (476.00) from holding FREEPORT MCMORAN INC 4375 or give up 4.83% of portfolio value over 90 days.

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

Stepan Company  vs.  FREEPORT MCMORAN INC 4375

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 weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and FREEPORT

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

The idea behind Stepan Company and FREEPORT MCMORAN INC 4375 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.