Correlation Between Stepan and KROGER

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

By analyzing existing cross correlation between Stepan Company and KROGER 54 percent, you can compare the effects of market volatilities on Stepan and KROGER 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 KROGER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and KROGER.

Diversification Opportunities for Stepan and KROGER

0.21

Correlation Coefficient

Stepan  KROGER

Modest diversification

The 3 months correlation between Stepan and KROGER is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and KROGER 54 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER 54 percent 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER 54 percent has no effect on the direction of Stepan i.e., Stepan and KROGER go up and down completely randomly.

Pair Corralation between Stepan and KROGER

Considering the 90-day investment horizon Stepan Company is expected to generate 1.82 times more return on investment than KROGER. However, Stepan is 1.82 times more volatile than KROGER 54 percent. It trades about 0.03 of its potential returns per unit of risk. KROGER 54 percent is currently generating about -0.11 per unit of risk. If you would invest  7,344  in Stepan Company on September 13, 2024 and sell it today you would earn a total of  206.00  from holding Stepan Company or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.37%
Values	Daily Returns

Stepan Company  vs.  KROGER 54 percent

Stepan Company

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

KROGER 54 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KROGER 54 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 KROGER 54 percent investors.

Pair Trading with Stepan and KROGER

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

The idea behind Stepan Company and KROGER 54 percent 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.