Correlation Between Stepan and 718546AK0

Can any of the company-specific risk be diversified away by investing in both Stepan and 718546AK0 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 718546AK0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stepan Company and PHILLIPS 66 465, you can compare the effects of market volatilities on Stepan and 718546AK0 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 718546AK0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and 718546AK0.

Diversification Opportunities for Stepan and 718546AK0

0.17

Correlation Coefficient

Stepan  718546AK0

Average diversification

The 3 months correlation between Stepan and 718546AK0 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and PHILLIPS 66 465 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILLIPS 66 465 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 718546AK0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHILLIPS 66 465 has no effect on the direction of Stepan i.e., Stepan and 718546AK0 go up and down completely randomly.

Pair Corralation between Stepan and 718546AK0

Considering the 90-day investment horizon Stepan Company is expected to generate 0.84 times more return on investment than 718546AK0. However, Stepan Company is 1.19 times less risky than 718546AK0. It trades about -0.07 of its potential returns per unit of risk. PHILLIPS 66 465 is currently generating about -0.06 per unit of risk. If you would invest  7,488  in Stepan Company on September 17, 2024 and sell it today you would lose (132.00) from holding Stepan Company or give up 1.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Stepan Company  vs.  PHILLIPS 66 465

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 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.

PHILLIPS 66 465

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHILLIPS 66 465 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 718546AK0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and 718546AK0

The main advantage of trading using opposite Stepan and 718546AK0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, 718546AK0 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 718546AK0 will offset losses from the drop in 718546AK0's long position.

The idea behind Stepan Company and PHILLIPS 66 465 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.