Correlation Between 191216DC1 and Stepan

Can any of the company-specific risk be diversified away by investing in both 191216DC1 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 191216DC1 and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COCA COLA CO and Stepan Company, you can compare the effects of market volatilities on 191216DC1 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 191216DC1 with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of 191216DC1 and Stepan.

Diversification Opportunities for 191216DC1 and Stepan

0.14

Correlation Coefficient

191216DC1  Stepan

Average diversification

The 3 months correlation between 191216DC1 and Stepan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding COCA COLA CO and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and 191216DC1 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 COCA COLA CO 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 191216DC1 i.e., 191216DC1 and Stepan go up and down completely randomly.

Pair Corralation between 191216DC1 and Stepan

Assuming the 90 days trading horizon COCA COLA CO is expected to generate 2.75 times more return on investment than Stepan. However, 191216DC1 is 2.75 times more volatile than Stepan Company. It trades about 0.15 of its potential returns per unit of risk. Stepan Company is currently generating about -0.5 per unit of risk. If you would invest  6,180  in COCA COLA CO on September 26, 2024 and sell it today you would earn a total of  714.00  from holding COCA COLA CO or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

COCA COLA CO  vs.  Stepan Company

COCA A CO

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COCA COLA CO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 191216DC1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with 191216DC1 and Stepan

The main advantage of trading using opposite 191216DC1 and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 191216DC1 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 COCA COLA CO 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..