Correlation Between ZOOZ Power and Stepan

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

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

Diversification Opportunities for ZOOZ Power and Stepan

-0.6

Correlation Coefficient

ZOOZ Power  Stepan

Excellent diversification

The 3 months correlation between ZOOZ and Stepan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ZOOZ Power Ltd and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and ZOOZ Power 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 ZOOZ Power Ltd 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 ZOOZ Power i.e., ZOOZ Power and Stepan go up and down completely randomly.

Pair Corralation between ZOOZ Power and Stepan

Assuming the 90 days horizon ZOOZ Power Ltd is expected to generate 10.56 times more return on investment than Stepan. However, ZOOZ Power is 10.56 times more volatile than Stepan Company. It trades about 0.08 of its potential returns per unit of risk. Stepan Company is currently generating about -0.04 per unit of risk. If you would invest  9.99  in ZOOZ Power Ltd on September 28, 2024 and sell it today you would lose (1.13) from holding ZOOZ Power Ltd or give up 11.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	60.97%
Values	Daily Returns

ZOOZ Power Ltd  vs.  Stepan Company

ZOOZ Power

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZOOZ Power Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ZOOZ Power showed 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 weak 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 ZOOZ Power and Stepan

The main advantage of trading using opposite ZOOZ Power and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZOOZ Power 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 ZOOZ Power Ltd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.