Correlation Between Sea and Stepan

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

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

Diversification Opportunities for Sea and Stepan

-0.14

Correlation Coefficient

Sea  Stepan

Good diversification

The 3 months correlation between Sea and Stepan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Sea 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 Sea are associated (or correlated) with Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Sea i.e., Sea and Stepan go up and down completely randomly.

Pair Corralation between Sea and Stepan

Allowing for the 90-day total investment horizon Sea is expected to generate 1.24 times more return on investment than Stepan. However, Sea is 1.24 times more volatile than Stepan Company. It trades about -0.04 of its potential returns per unit of risk. Stepan Company is currently generating about -0.3 per unit of risk. If you would invest  11,368  in Sea on September 20, 2024 and sell it today you would lose (204.00) from holding Sea or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sea  vs.  Stepan Company

Sea

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sea and Stepan

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

The idea behind Sea and Stepan Company 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.