Correlation Between Stepan and Valhi
Can any of the company-specific risk be diversified away by investing in both Stepan and Valhi 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 Valhi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Valhi Inc, you can compare the effects of market volatilities on Stepan and Valhi 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 Valhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Valhi.
Diversification Opportunities for Stepan and Valhi
Very weak diversification
The 3 months correlation between Stepan and Valhi is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi 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 Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of Stepan i.e., Stepan and Valhi go up and down completely randomly.
Pair Corralation between Stepan and Valhi
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Valhi. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.74 times less risky than Valhi. The stock trades about -0.09 of its potential returns per unit of risk. The Valhi Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,935 in Valhi Inc on October 3, 2024 and sell it today you would lose (596.00) from holding Valhi Inc or give up 20.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Stepan Company vs. Valhi Inc
Performance |
Timeline |
Stepan Company |
Valhi Inc |
Stepan and Valhi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stepan and Valhi
The main advantage of trading using opposite Stepan and Valhi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Valhi 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 Valhi will offset losses from the drop in Valhi's long position.Stepan vs. LyondellBasell Industries NV | Stepan vs. International Flavors Fragrances | Stepan vs. Cabot | Stepan vs. Westlake Chemical |
Valhi vs. Huntsman | Valhi vs. Lsb Industries | Valhi vs. Westlake Chemical Partners | Valhi vs. Green Plains Renewable |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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