Correlation Between Stepan and 50249AAK9

Can any of the company-specific risk be diversified away by investing in both Stepan and 50249AAK9 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 50249AAK9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepan Company and LYB 38 01 OCT 60, you can compare the effects of market volatilities on Stepan and 50249AAK9 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 50249AAK9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and 50249AAK9.

Diversification Opportunities for Stepan and 50249AAK9

0.34

Correlation Coefficient

Stepan  50249AAK9

Weak diversification

The 3 months correlation between Stepan and 50249AAK9 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and LYB 38 01 OCT 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB 38 01 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 50249AAK9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB 38 01 has no effect on the direction of Stepan i.e., Stepan and 50249AAK9 go up and down completely randomly.

Pair Corralation between Stepan and 50249AAK9

Considering the 90-day investment horizon Stepan Company is expected to under-perform the 50249AAK9. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.22 times less risky than 50249AAK9. The stock trades about -0.81 of its potential returns per unit of risk. The LYB 38 01 OCT 60 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,898  in LYB 38 01 OCT 60 on October 13, 2024 and sell it today you would lose (65.00) from holding LYB 38 01 OCT 60 or give up 0.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.89%
Values	Daily Returns

Stepan Company  vs.  LYB 38 01 OCT 60

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.

LYB 38 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB 38 01 OCT 60 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 LYB 38 01 OCT 60 investors.

Pair Trading with Stepan and 50249AAK9

The main advantage of trading using opposite Stepan and 50249AAK9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, 50249AAK9 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 50249AAK9 will offset losses from the drop in 50249AAK9's long position.

The idea behind Stepan Company and LYB 38 01 OCT 60 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 Commodity Directory module to find actively traded commodities issued by global exchanges.