Correlation Between Dupont De and STEP Energy
Can any of the company-specific risk be diversified away by investing in both Dupont De and STEP Energy 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 Dupont De and STEP Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and STEP Energy Services, you can compare the effects of market volatilities on Dupont De and STEP Energy 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 Dupont De with a short position of STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and STEP Energy.
Diversification Opportunities for Dupont De and STEP Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dupont and STEP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services and Dupont De 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 Dupont De Nemours are associated (or correlated) with STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Dupont De i.e., Dupont De and STEP Energy go up and down completely randomly.
Pair Corralation between Dupont De and STEP Energy
Allowing for the 90-day total investment horizon Dupont De is expected to generate 2.75 times less return on investment than STEP Energy. But when comparing it to its historical volatility, Dupont De Nemours is 2.23 times less risky than STEP Energy. It trades about 0.04 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 230.00 in STEP Energy Services on August 31, 2024 and sell it today you would earn a total of 135.00 from holding STEP Energy Services or generate 58.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Dupont De Nemours vs. STEP Energy Services
Performance |
| Timeline |
| Dupont De Nemours |
| STEP Energy Services |
Dupont De and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and STEP Energy
The main advantage of trading using opposite Dupont De and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, STEP Energy 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 STEP Energy will offset losses from the drop in STEP Energy's long position.| Dupont De vs. Eastman Chemical | Dupont De vs. Linde plc Ordinary | Dupont De vs. Ecolab Inc | Dupont De vs. Sherwin Williams Co |
| STEP Energy vs. Petroleo Brasileiro Petrobras | STEP Energy vs. Equinor ASA ADR | STEP Energy vs. Eni SpA ADR | STEP Energy vs. YPF Sociedad Anonima |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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