Correlation Between INGERSOLL and Stepan

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

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

Diversification Opportunities for INGERSOLL and Stepan

-0.09

Correlation Coefficient

INGERSOLL  Stepan

Good diversification

The 3 months correlation between INGERSOLL and Stepan is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding INGERSOLL RAND GLOBAL HLDG and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and INGERSOLL 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 INGERSOLL RAND GLOBAL HLDG 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 INGERSOLL i.e., INGERSOLL and Stepan go up and down completely randomly.

Pair Corralation between INGERSOLL and Stepan

Assuming the 90 days trading horizon INGERSOLL RAND GLOBAL HLDG is expected to under-perform the Stepan. But the bond apears to be less risky and, when comparing its historical volatility, INGERSOLL RAND GLOBAL HLDG is 1.78 times less risky than Stepan. The bond trades about -0.23 of its potential returns per unit of risk. The Stepan Company is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  7,611  in Stepan Company on September 24, 2024 and sell it today you would lose (903.00) from holding Stepan Company or give up 11.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.62%
Values	Daily Returns

INGERSOLL RAND GLOBAL HLDG  vs.  Stepan Company

INGERSOLL RAND GLOBAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND GLOBAL HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for INGERSOLL RAND GLOBAL HLDG 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 latest unsteady 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 INGERSOLL and Stepan

The main advantage of trading using opposite INGERSOLL and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INGERSOLL 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 INGERSOLL RAND GLOBAL HLDG 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..