Correlation Between Stepan and INGERSOLL

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

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

Diversification Opportunities for Stepan and INGERSOLL

-0.31

Correlation Coefficient

Stepan  INGERSOLL

Very good diversification

The 3 months correlation between Stepan and INGERSOLL is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and INGERSOLL RAND LUXEMBOURG FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND LUXEM 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND LUXEM has no effect on the direction of Stepan i.e., Stepan and INGERSOLL go up and down completely randomly.

Pair Corralation between Stepan and INGERSOLL

Considering the 90-day investment horizon Stepan Company is expected to under-perform the INGERSOLL. In addition to that, Stepan is 1.51 times more volatile than INGERSOLL RAND LUXEMBOURG FIN. It trades about -0.58 of its total potential returns per unit of risk. INGERSOLL RAND LUXEMBOURG FIN is currently generating about 0.71 per unit of volatility. If you would invest  8,841  in INGERSOLL RAND LUXEMBOURG FIN on October 6, 2024 and sell it today you would earn a total of  111.00  from holding INGERSOLL RAND LUXEMBOURG FIN or generate 1.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

Stepan Company  vs.  INGERSOLL RAND LUXEMBOURG FIN

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.

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND LUXEMBOURG FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGERSOLL RAND LUXEMBOURG FIN investors.

Pair Trading with Stepan and INGERSOLL

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

The idea behind Stepan Company and INGERSOLL RAND LUXEMBOURG FIN 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.