Correlation Between Tandem Diabetes and Stepan

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

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

Diversification Opportunities for Tandem Diabetes and Stepan

-0.01

Correlation Coefficient

Tandem Diabetes  Stepan

Good diversification

The 3 months correlation between Tandem and Stepan is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Stepan go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Stepan

Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the Stepan. In addition to that, Tandem Diabetes is 1.85 times more volatile than Stepan Company. It trades about -0.08 of its total potential returns per unit of risk. Stepan Company is currently generating about 0.05 per unit of volatility. If you would invest  7,382  in Stepan Company on September 4, 2024 and sell it today you would earn a total of  320.00  from holding Stepan Company or generate 4.33% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Stepan Company

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Stepan Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stepan Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tandem Diabetes and Stepan

The main advantage of trading using opposite Tandem Diabetes and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.