Correlation Between Xponential Fitness and Stepan

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

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

Diversification Opportunities for Xponential Fitness and Stepan

-0.02

Correlation Coefficient

Xponential Fitness  Stepan

Good diversification

The 3 months correlation between Xponential and Stepan is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Xponential Fitness 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 Xponential Fitness 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 Xponential Fitness i.e., Xponential Fitness and Stepan go up and down completely randomly.

Pair Corralation between Xponential Fitness and Stepan

Given the investment horizon of 90 days Xponential Fitness is expected to generate 2.38 times more return on investment than Stepan. However, Xponential Fitness is 2.38 times more volatile than Stepan Company. It trades about 0.3 of its potential returns per unit of risk. Stepan Company is currently generating about -0.15 per unit of risk. If you would invest  1,295  in Xponential Fitness on October 22, 2024 and sell it today you would earn a total of  272.00  from holding Xponential Fitness or generate 21.0% return on investment over 90 days.

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

Xponential Fitness  vs.  Stepan Company

Xponential Fitness

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

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 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 Xponential Fitness and Stepan

The main advantage of trading using opposite Xponential Fitness and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xponential Fitness 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 Xponential Fitness 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.