Correlation Between Viemed Healthcare and Stepan

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

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

Diversification Opportunities for Viemed Healthcare and Stepan

0.72

Correlation Coefficient

Viemed Healthcare  Stepan

Poor diversification

The 3 months correlation between Viemed and Stepan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Viemed Healthcare and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Viemed Healthcare 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 Viemed Healthcare 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 Viemed Healthcare i.e., Viemed Healthcare and Stepan go up and down completely randomly.

Pair Corralation between Viemed Healthcare and Stepan

Considering the 90-day investment horizon Viemed Healthcare is expected to generate 0.93 times more return on investment than Stepan. However, Viemed Healthcare is 1.07 times less risky than Stepan. It trades about -0.11 of its potential returns per unit of risk. Stepan Company is currently generating about -0.1 per unit of risk. If you would invest  816.00  in Viemed Healthcare on December 27, 2024 and sell it today you would lose (92.00) from holding Viemed Healthcare or give up 11.27% of portfolio value over 90 days.

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

Viemed Healthcare  vs.  Stepan Company

Viemed Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Viemed Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Stepan Company

Risk-Adjusted Performance

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 Viemed Healthcare and Stepan

The main advantage of trading using opposite Viemed Healthcare and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viemed Healthcare 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 Viemed Healthcare 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.