Correlation Between American Vanguard and Stepan
Can any of the company-specific risk be diversified away by investing in both American Vanguard 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 American Vanguard and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Vanguard and Stepan Company, you can compare the effects of market volatilities on American Vanguard 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 American Vanguard with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Vanguard and Stepan.
Diversification Opportunities for American Vanguard and Stepan
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Stepan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Vanguard and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and American Vanguard 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 American Vanguard 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 American Vanguard i.e., American Vanguard and Stepan go up and down completely randomly.
Pair Corralation between American Vanguard and Stepan
Considering the 90-day investment horizon American Vanguard is expected to generate 1.67 times more return on investment than Stepan. However, American Vanguard is 1.67 times more volatile than Stepan Company. It trades about 0.02 of its potential returns per unit of risk. Stepan Company is currently generating about -0.08 per unit of risk. If you would invest 590.00 in American Vanguard on November 2, 2024 and sell it today you would earn a total of 19.00 from holding American Vanguard or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Vanguard vs. Stepan Company
Performance |
| Timeline |
| American Vanguard |
| Stepan Company |
American Vanguard and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Vanguard and Stepan
The main advantage of trading using opposite American Vanguard and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Vanguard 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.| American Vanguard vs. CF Industries Holdings | American Vanguard vs. The Mosaic | American Vanguard vs. CVR Partners LP | American Vanguard vs. ICL Israel Chemicals |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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