Correlation Between Stepan and ZOOZ Power

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

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

Diversification Opportunities for Stepan and ZOOZ Power

-0.58

Correlation Coefficient

Stepan  ZOOZ Power

Excellent diversification

The 3 months correlation between Stepan and ZOOZ is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and ZOOZ Power Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOOZ Power 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 ZOOZ Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOOZ Power has no effect on the direction of Stepan i.e., Stepan and ZOOZ Power go up and down completely randomly.

Pair Corralation between Stepan and ZOOZ Power

Considering the 90-day investment horizon Stepan Company is expected to under-perform the ZOOZ Power. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 10.41 times less risky than ZOOZ Power. The stock trades about -0.04 of its potential returns per unit of risk. The ZOOZ Power Ltd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.99  in ZOOZ Power Ltd on September 27, 2024 and sell it today you would lose (1.59) from holding ZOOZ Power Ltd or give up 15.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.2%
Values	Daily Returns

Stepan Company  vs.  ZOOZ Power Ltd

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 unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ZOOZ Power

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZOOZ Power Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, ZOOZ Power showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stepan and ZOOZ Power

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

The idea behind Stepan Company and ZOOZ Power Ltd 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.