Correlation Between CenterPoint Energy and Stepan
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and Stepan Company, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Stepan.
Diversification Opportunities for CenterPoint Energy and Stepan
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CenterPoint and Stepan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and Stepan go up and down completely randomly.
Pair Corralation between CenterPoint Energy and Stepan
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 0.62 times more return on investment than Stepan. However, CenterPoint Energy is 1.6 times less risky than Stepan. It trades about 0.24 of its potential returns per unit of risk. Stepan Company is currently generating about -0.11 per unit of risk. If you would invest 3,267 in CenterPoint Energy on November 27, 2024 and sell it today you would earn a total of 162.00 from holding CenterPoint Energy or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. Stepan Company
Performance |
| Timeline |
| CenterPoint Energy |
| Stepan Company |
CenterPoint Energy and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and Stepan
The main advantage of trading using opposite CenterPoint Energy and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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