Correlation Between Willamette Valley and Stepan

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

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

Diversification Opportunities for Willamette Valley and Stepan

0.0

Correlation Coefficient

Willamette Valley  Stepan

Pay attention - limited upside

The 3 months correlation between Willamette and Stepan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Stepan go up and down completely randomly.

Pair Corralation between Willamette Valley and Stepan

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to generate 0.99 times more return on investment than Stepan. However, Willamette Valley Vineyards is 1.01 times less risky than Stepan. It trades about 0.01 of its potential returns per unit of risk. Stepan Company is currently generating about -0.13 per unit of risk. If you would invest  348.00  in Willamette Valley Vineyards on September 29, 2024 and sell it today you would lose (1.00) from holding Willamette Valley Vineyards or give up 0.29% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  Stepan Company

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Willamette Valley is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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 Willamette Valley and Stepan

The main advantage of trading using opposite Willamette Valley and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .