Correlation Between Deluxe and Stepan
Can any of the company-specific risk be diversified away by investing in both Deluxe 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 Deluxe and Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deluxe and Stepan Company, you can compare the effects of market volatilities on Deluxe 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 Deluxe with a short position of Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and Stepan.
Diversification Opportunities for Deluxe and Stepan
Very weak diversification
The 3 months correlation between Deluxe and Stepan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company and Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and Stepan go up and down completely randomly.
Pair Corralation between Deluxe and Stepan
Considering the 90-day investment horizon Deluxe is expected to generate 1.27 times more return on investment than Stepan. However, Deluxe is 1.27 times more volatile than Stepan Company. It trades about 0.34 of its potential returns per unit of risk. Stepan Company is currently generating about 0.11 per unit of risk. If you would invest 1,892 in Deluxe on August 28, 2024 and sell it today you would earn a total of 451.00 from holding Deluxe or generate 23.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deluxe vs. Stepan Company
Performance |
| Timeline |
| Deluxe |
| Stepan Company |
Deluxe and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deluxe and Stepan
The main advantage of trading using opposite Deluxe and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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.| Deluxe vs. Criteo Sa | Deluxe vs. Emerald Expositions Events | Deluxe vs. Marchex | Deluxe vs. Integral Ad Science |
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 CEOs Directory module to screen CEOs from public companies around the world.
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